Understand the behavioral effects of budgets and how dysfunctional effects can b

Question

Understand the behavioral effects of budgets and how dysfunctional effects can be minimized.

Know the components of the master budget and the general sequence in which they must be prepared.

Know how to prepare the sales, production, raw materials purchases, direct labor, and manufacturing overhead budgets.

Know how to prepare budgeted cash collections and disbursements.

Understand the purpose if standard costs and how are developed.

Know how the flexible budget is used as a benchmark and how it differs from the master budget.

Understand how budget variances arise and know how to calculate and interpret the following variances:

Direct material price and quantity variances

Labor rate and efficiency variances

Variable overhead rate and efficiency variances

Fixed overhead spending variance

Know how to do calculations related to the time value of money using the tables in the text or a financial calculator (PV tables will be supplied for the exam).

Understand the differences between cash flows and net income.

Know how to execute the following capital budgeting techniques:

Net present value method (NPV)

Internal rate of return (IRR)

Payback method

Accounting rate of return

Know when a project is acceptable when using the capital budgeting techniques above, including the profitability index.

Understand the strengths and weaknesses of the capital budgeting techniques listed above.

Explanation / Answer

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