9-1

Chapter Six

Profit Planning,
Activity-Based Budgeting
and e-Budgeting

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Purposes of Budgeting Systems

Budget Planning
a detailed plan, Facilitating
expressed in Communication and
quantitative terms, Coordination
that specifies how Allocating Resources
resources will be Controlling Profit and
acquired and used Operations
during a specified Evaluating Performance
period of time. and Providing Incentives

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Activity-Based Costing versus

Activity-Based Budgeting
Resources Resources
Activity-Based
Costing (ABC)

Activities Activities

Activity-Based
Cost objects: Budgeting (ABB)
Forecast of products
products and services and services to be
produced, and produced and
customers served. customers served.
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Types of Budgets
Capital budgets with acquisitions
that normally cover several years.
Long Range Budgets

Continuous or
Rolling Budget
1999 2000 2001 2002

This budget is usually a twelve-month

budget that rolls forward one month
as the current month is completed.

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Sales of Services or Goods
Exh.
9-1

Ending
Inventory
Budget Production
Work in Process Budget
and Finished
Goods

Direct Direct Selling and

Overhead
Materials Labor Administrative
Budget Budget Budget
Budget

Ending Cash Budget

Inventory
Budget
Direct Materials Budgeted Financial Statements
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Budget Administration

The Budget Committee is a standing

committee responsible for . . .
overall policy matters relating to the budget.
coordinating the preparation of the budget.

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International Aspects of Budgeting

Firms with international operations face special

problems when preparing a budget.
Fluctuations in foreign currency exchange
rates.
High inflation rates in some foreign countries.
Differences in local economic conditions.

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Budgeting Product Life-Cycle Costs

Product planning
and concept
Design.

Distribution
Preliminary
and customer
design.
service.

Detailed design
Production.
and testing.

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End of Chapter 6

McGraw-Hill/Irwin