Short-Term Budgeting Lecture Notes PDF

Short-Term Budgeting - Lecture notes 3 BS Accountancy (ACC 102) Module 3 Short-Term Budgeting Introduction Repeated references to budget allowances have been made throughout previous chapte...

Short-Term Budgeting - Lecture notes 3 BS Accountancy (ACC 102) Module 3 Short-Term Budgeting Introduction Repeated references to budget allowances have been made throughout previous chapters and we have seen how closely accounting and budgeting are related and how one depends on the other. Accounting draws some of its data from planned performances established in the budget; in turn, recorded historical data provide a basis for determining budget estimates. Intended Learning Outcomes After studying this chapter, students should be able to 1. Define budgeting and other related terminologies 2. Understand the uses of the process of budgeting 3. Understand the functions and composition of budget committee 4. Determine the relationships between operating and financial budgets 5. Identify the different types of budgets or the major composition of the master budget 6. Prepare a master budget and its supporting schedules 7. Prepare operating and financial budgets using the flexible budget model 8. Describe the different models of budgeting 9. Relate budgeting to standards-setting, planning and controlling functions of management Budget defined A budget is a financial plan of the resources needed to carry out tasks and meet financial goals. It is also a quantitative expression of the goals the organization wishes to achieve and the cost of attaining these goals. The act of preparing a budget is called budgeting. T  he use of budgets to control a firm’s activities is known as budgetary control. The overall or master budget (also known as planning budget or budget plan) indicates the sales level, production and cost levels, income and cash flows that are anticipated for the coming year. The master budget is a summary of all phases of a company’s plans and goals for the future. In short, it represents a comprehensive expression of management’s plan for the future and how these plans are to be accomplishe. The Budgetary System 3 0 The CEO has a mission to accomplish and an objective to achieve. Otherwise, he has no business keeping his job. To achieve the objectives, he has to devise strategies to win people and optimize other resources in the organization. The key paradigm is “winning people”. To do this and to unleash the power of organizational oneness, the CEO must encourage employee participation and involvement and enlist their commitment towards the organizational objectives. These could be done through the process of budgeting, which has the following uses: 1. Communication. The most important process of management is communication. Vision, mission, goals, objectives, plans, standards, and performance evaluation measures must be clearly articulated and understood among officers and personnel. More than understanding, man in the organization must believe, get involved and work with commitment in achieving organizational goals. This could be done by clearly delineating the lines of communications i.e., an organizational structure should clearly define the lines of authority and responsibility. 2. Motivation As communication lines are cleared and made more transparent, people will understand the end-results of organizational plans and ask. As they are made part in conceptualizing the plans, they get involved and become more committed in attaining plans. This process moves people to act in accordance with organizational goals. 3. Standards. After the actions, results should be summarized and evaluated. At the very onset, the measurement to be used in evaluating performance m  ust be established. These measures of performance are called “standards”. They must be clearly defined a  nd agreed-upon b  etween the person, whose performance is evaluated, and the evaluator. If standards are too high or improbable to achieve, people get demoralized as there is no fair chance of getting a high performance rating. If standards are too low, people are not motivated to exert their best effort, thereby encouraging mediocre results. Standards are set to motivate. They are also an important basis for planning and controlling. Standards to be objective, are normally expressed in quantitative form (e.g., amount, units, hours, thirst, kilograms, number of invoices processed, etc.,). Still, the most objective mode of expressing standards is in terms of money. 4. Planning As standards are set, plans could be done better. A good plan must be S. M. A.R. T. (i.e., specific, measurable, attainable, realistic, and time-bounded). Plans must be specific to be clear, measurable to be fair in the evaluation process, attainable to elicit outstanding performance, realistic to allow people to relate to, and time-bounded to impress urgency and deadlines. The design and development of a plan must be participated in by people in the organization. This means an effective appetizer to increase one's desire in achieving an objective. As plans are developed, men must start developing a “sense of ownership“, and 3 0 eventually, commitment. Questions such as, “what resources are needed?”, “How do we do it?”, “When do we do it?“, “Who will do it?“, And “where do we do it?“ need to be resolved with acceptable certainty. Planning i s an act of approximating the future and preparing resources, systems, strategies, structures and methods that could best seize the opportunities in a given condition to increase the equity or wealth of an organization. 5. Organizing and Directing As plans are framed, resources are organized accordingly. Policies, systems, operational strategies, methods and means are devised as activities are mapped-out and lined-up to execute plans. People are trained, machines brought in, materials outsourced, systems and standards strictly implemented, and offline and online performances monitored. Revisions of plans may be done in-progress and remedial actions are devised and executed when necessary. All along, acts are done in accordance with organizational plans, goals and objectives. In this context, the importance of operational management cannot be undermined. The effectiveness and fitness of managerial judgment are tested. Resources are not only marshaled but are organized and operationally managed. Actions, processes, and transformations are done to meet the objectives of the organization. 6. Controlling and Performance Evaluation Controls are to be devised and installed prior to business and operational processes. Controls are also done during the process. Controls are classified as feedback controls, concurrent controls, and feedforward controls. Feedback controls p  ertain to completed activities, concurrent controls r efer to ongoing processes, feedforward controls a  nticipate and prevent problems. Questions such as, “what structures are best for our operation?“, “what systems and policies are best applicable under the circumstances?”, “why are we not meeting our targets or why are we extending our targets?“, “why are machines and men not performing as expected?”, “ what methods are applicable under the circumstances?“, “why is the market behaving differently?“, And “why do our financial results differ from our estimates?“ need answers. The Budget Committee … develop an executive team! Top executives should primarily subscribe to organizational objectives. The CEO must therefore exercise competence in leading and managing his top executives. Top executives must not only be capable and competent but must have “ownership“ of organizational goals. There must be trust and openness in communication. One way to achieve this is through the creation of a Budget Committee. A budget committee i s normally composed of top executives in the administrative, operational and financial areas of business such as the Vice Presidents for Sales, Production,Purchasing, Human Resources, Information Technology, Engineering and Quality, Administration, and, most 3 0 especially, Finance. The Budget Committee is also known in practice as the management committee ( i.e., MANCOM) or executive committee ( i.e., EXECOM). The Budget Committee, which is normally headed by a Budget Director , administers the budgetary process. It is concerned at developing the budget manual that includes a budget planning calendar and distribution instructions for all budget schedules. A budget planning calendar is the schedule of activities for the development and production of the budget. It includes a list of dates indicating when the specific information is needed to be provided to other departments or units until the entire budgetary process is completed. A budget manual includes distribution instructions for all budget schedules to show that a segment’s budget is an input to another department or business unit in the preparation of their own budget. Without distribution instructions, someone who needs a particular schedule might be overlooked, and delays may occur. A planning calendar integrates the entire budgetary activities. Along the way, men should be educated about the purpose, forms, and processes of the budgetary system. They should be taught how to make their own budget using the standard chart of accounts and the standardized budget schedules, know the relevance of their schedule to another schedule, and the model of performance evaluation. The bottom-line is, everybody should be made aware of and be involved. The Master Budgets … a financial process model! Budgets are plans expressed in quantitative form, primarily in financial expression. When plans are expressed quantitatively, they are more objective, understandable, and measurable. The budgetary process is dependent on the organizational structure and purposes. As such, the budget normally stay in answering the basic question, “Is there a market for the business?” This question directs the master budgeting process to start in the sales budget. The normal budgetary sequence is shown in figure 5.1. 3 0 Normally, the development of business is driven by its demand. In this perspective, the budgeting process starts from the sales budget. Once it is projected, the production budgets, operating expenses budgets, and the budgeted statement of profit or loss follow (i.e., operating budgets). Then, the financial budgets leading to the budgeted statement of financial position and the budgeted statement of cash flows with supporting schedules on collections from customers and payments to suppliers (i.e., financial budgets). The entirety of the operating and financial budgets comprise the master budgets of the enterprise at a given level of activity in a given business period. If there is a limitation on organizations resources such as materials and parts, direct labor hours, machine hours, financial, cultural, and regulatory aspects, the starting point in preparing the master budget shall be defined by such limitation. 3 0 Types of Budget The types of budgets or the major composition of the master budget a  re: 1) The Operating budget 2) The Financial budget 3) The Capital budget The following is a simplified subclasfficiation of the above-mentioned types of budget for a manufacturing firm: A. Operating Budget 1. Budgeted Income Statement a. Sales budget b. Production budget 1) Materials cost budget 2) Direct labor cost budget 3) Factory overhead budget 4) Inventory levels 2. Cost of Sales Budget 3. Selling and Administrative expenses budget 4. Financial Expense budget B. Financial Budget 1. Budgeted Statement of Financial Position 2. Cash Budget C. Capital Investment Budget Budgeting Terminologies Defined Budgeted Income Statement - Refers to projection of revenue, expenses, and results of operations for a definite period of time. Cash budget - A period-by-period statement of cash at the start of a budget period, expected cash receipts classified by source; expected cash disbursements, classified by function, responsibility, and form; and the resulting cash balance at the end of the budget period. Financial Budget - Refers to the budget of the financial resources as reflected in the budget statement of financial position and cash budget. 3 0 Fixed Budget - Projection of cost at a particular or one level of production (usually at normal capacity) for a definite time period. Flexible (variable) budget - Projection of cost at different levels of production for a definite period of time Participative budget - Budget prepared using employees at all levels in the organization Physical budget - Budget that is expressed in units of materials, number of employees or number of man-hours or service units rather than in pesos Planning budget (static budget) - Another term for master budget Production budget - Production plan of resources needed to meet current sales demand and ensure adequate inventory levels Program budget - Budget for the major programs or projects that the company plans to undertake Operating budget - Refers to the plans for the conduct of business for the planning period; it includes the budgeted income statement and all its supporting budgets. Responsibility budget - Budget for a responsibility center Rolling (continuous, progressive) budget - Budget which is prepared throughout the year, that is, as one month elapses, a budget is prepared for one more month in the future Sales budget - Budget that shows the quantity of each product and the revenue expected to be sold Traditional budgeting - A system of budgeting which concentrates on the incremental change from the previous year assuming that the previous year’s activities are essential and must be continued. 3 0 Zero-based budgeting - A system of establishing financial plans beginning with an assumption of no-activity and justifying each program or activity level The Sales Budget Sales indicate meeting customers' wants, demands, needs, and desires. It fundamentally drives the creation of business activities. It is the initiating motive of business organization and the genesis of normal business planning. Mathematically, the sales are affected by the unit sales price and quantity sold. The unit sales price is affected by cost, competition, product substitutes, market trends, regulations, demand and supply behavior, and estimated profit, among other things. The number of units sold is affected by the unit sales price. Other factors influencing sales forecast include the past sales volume, general economic and industry conditions, relationship of sales to economic indicators (such as gross domestic product, gross national product, personal income, employment, prices in industrial production), relative product profitability, market research studies, advertising and other promotions, quality of salesforce, seasonal variations, production capacity, and long-run sales trends for various products. In forecasting sales, factors that have strong correlation with sales pattern are identified and used. Basically, there are three ways of making escalates for the sales budget: a. statistical forecasting based on analysis of general business conditions, market conditions, product growth curves, etc. b. Make an internal estimate by collecting the opinions of executives and sales staff. c. Analyze the various factors that affect sales revenue and then predict the future behavior of each of these factors. The estimated number of units sold could be estimated per product line, department, geographical area, model, and market classification. In projecting units to be sold, several forecasting techniques are employed which normally apply the concept of probability and best estimates models, statistics, and simulation analysis. The study of probability and other forecasting techniques are reserved in the chapter for quantitative techniques applied in business. Sample Problem 3.1. Estimated Sales in Units and Pesos The management of New corporation is considering three state economic conditions: strong, fair, and weak. Based on some macro studies, it has been agreed that the economy in the 3 0 coming year may be 40% strong, 50% fair and 10% weak. The projected number of units are 120,000 units, 90,000 units, and 50,000 units for strong, fair, and weak economic conditions, respectively. The budgeted unit sales price given the estimates in units sold is P 120. Five percent (5%) of the gross sales are estimated to be uncollectible. Required: 1. Budgeted units to be sold in the coming year 2. Budgeted amount of sales, net of doubtful accounts. Solutions/ Discussions: 1. The budgeted sales in units shall be determined as follows: Economy Projected Sales Units Probability Budgeted Unit Sales A 120,000 40% 48,000 B 90,000 50% 45,000 C 50,000 10% 5,000 Total 93,000 2. The budgeted net sales in pesos shall be: Budgeted sales in units 93,000 x Unit sales price P 120 Budgeted gross sales in pesos P 11,160,000 Less: Allowance for doubtful accounts (P 11,160,000 x 5%) 558,000 Budgeted net sales in pesos P 10,602,000 Once the sales units are projected and the sales amount already budgeted, the budgeted costs and expenses would now be estimated, then the financial budgets all in connection with the strategic plan of the business. In the following discussions, the unit sales price and projected sales in units are normally given. The Production Budget Budgeted production is based on budgeted sales and inventory policies. An inventory policy is normally based on the number of units to be sold in the following period. The formula for the budgeted production could be derived from the traditional method of determining number of units sold which states that finished goods inventory-beginning plus production less finished 3 0 goods inventory-ending equal budgeted sales. You tweak the formula and the computation for the budgeted production is as follows: Table 3.1. Pro-Forma Budgeted Production Projected sales x Add: Finished goods invty - end x Total Goods Available for Sale x Less: Finished Goods Inventory - Beg x Budgeted Production x Once the budgeted production is set, the budgeted materials, direct labor, and variable overhead may now be prepared. The budgeted fixed overhead is based on normal capacity (e.g., normal production) which is considered flat or constant over the periods (e.g., months) covered by the budget. It differs from the master budget where its level of capacity varies from one month to another. An illustration of Budgeted Production Schedule is presented on schedule 3 of Sample Problem 3.3. The Direct Materials Budget The raw materials budget is based on budgeted production. There are two (2) materials budgets to be estimated; 1. Budgeted direct materials used 2. Budgeted direct materials purchases Budgeted direct materials used budget Multiply the budgeted production by the standard materials per unit of finished goods and you get the budgeted direct materials to be used, or the budgeted direct materials requirements. This makes the standard costing system a “sine qua non” in the budgetary process. The standard cost is used in the preparation of the direct materials budgets, direct labor, variable overhead, fixed overhead, selling expenses, and administrative expenses budgets as well. Budgeted direct materials purchases budget Direct material purchases is direct materials used add the materials inventory ending, then deduct the materials inventory beginning. 3 0 This procedure is derived from the traditional computation of raw materials used which is raw materials inventory-beginning plus materials purchases less raw materials inventory-ending. From this standpoint, the raw materials purchases budgets are derived, as follows. Table 3.2. Pro-Forma Budgeted Direct Materials Used and Purchases Budgeted direct materials used x (Budgeted production x Std. materials per unit) Add: Materials Inventory End  x Total Materials for Use x Less: Materials Inventory - Beg  x Budgeted direct mat. Purchases in units  x x Materials cost per unit  x Budgeted materials purchases in pesos  P x An illustration of Budgeted Direct Materials Used and Purchases is presented in Sample Problem 3.4, Schedule 4. The Direct Labor Budget Let us assume a labor intensive operation where workers are paid by the hour. On this premise, the budgeted direct labor hours is budgeted production times the standard direct labor hour per unit produced. The standard direct labor rate per hour is multiplied to budgeted direct labor hours to get the budgeted direct labor cost. The standard direct labor hours per unit and the standard rate per hour are to be provided by the standard cost sheet. The pro-forma computation of the budgeted direct labor cost is as follows: Table 3.3. Pro-Forma Budgeted Direct Labor Budgeted Direct Labor hours x (Budgeted production x Std. DLH per unit) x DL Rate per hour P x Budgeted DL cost P x The budgeted direct labor hours would determine the number of production personnel needed to be employed for a given budgetary period. An illustration of Budgeted Direct Labor is presented in Sample Problem 6.5, Schedule 6. The Factory Overhead Budget 3 0 The factory overhead should be budgeted separately for the fixed overhead in the variable overhead components. Fixed overhead is constant in total while the standard fixed overhead rate is computed based on the normal capacity. In short-term budgeting the standard fixed overhead rate is considered constant. Total variable overhead costs change in relation to the level of production while unit variable cost is constant. The computational guideline for the factory overhead is as follows: Table 3.4. Budgeted Factory Overhead Computations Budgeted variable overhead x (Budgeted production x Std. Var OH per unit) Budgeted fixed overhead P x  (Normal capacity x Std. Fx OH rate/ unit) Budgeted total overhead P x The standard hours per unit and standard overhead rates per hour are to be based on the standard cost sheet developed by the business. An illustration of Budgeted Factory Overhead is presented in Sample Problem 6.5, Schedule 7. The Budgeted Statement of Cash Flows Cash may be considered as the alpha and omega of the business process. Investors interest would boil down to the ability of the business to return their money and how much more could be given to them as premium for accepting the risk of investing in the business. Managers are also interested in the daily and regular cash position of the business to effectively monitor operating activities. An analysis of cash inflows and outflows would provide management vita information on the liquidity needs of the business. Several models of cash management, presentation and analyses have been developed for management use, as follows: 1. Cash budget model 2. Economic cash flow model 3. Accounting statement of cash flow model The presentation formats of these cash report presentation models are presented in each of the boxes in the following page. 3 0 Fig. 6.2 Cash Report Presentation Models The cash management model separates the operating and investing cash performance before the financing activities. This gives the management a vital perspective on the ability of the business activities (i.e., operating and investing) to generate cash. The financing section includes the receipts from short-term financing and long-term financing as well. However, the short-term financing is always prioritized for operating cash management purposes. The financing section also includes the payments to interest, principal, and return of equity. Cash flows are classified as financing, investing, and operating activities. This classification may be traced from understanding the general contents of the Statement of Financial Position and Statement of Profit or Loss. Statement of Financial Position 3 0  INVESTING ACTIVITIES FINANCING ACTIVITIES Inflows Outflows Inflows Outflows Sale of Noncurrent assets ✔ Long-term borrowing ✔ Acquisition of noncurrent ✔ Payment of long-term debt ✔ assets Issuance of shares of stock ✔ Retirement of shares of ✔ stock Purchase of treasury stock ✔ Re-issuance of treasury ✔ stock Dividends paid ✔ Statement of Profit or Loss OPERATING ACTIVITIES Inflows Outflows Cash sales ✔ Collections from credit customers ✔ Receipts from other revenue ✔ Cash purchases ✔ Payments to merchandise suppliers ✔ Payments to operating expenses ✔ Payments to other expenses ✔ Operating activities employ current assets and current liabilities. The difference of current assets and current liabilities is called the working capital. It is the fundamental resource used by the management in managing revenues, costs, and profit. As such, current items pertain to operating activities and are excluded from financing and investing activities. Investing activities basically refer to those of noncurrent assets and marketable securities. Financing activities essentially relate to long-term debt and equity transactions. Under the International Financial Reporting Standards, specifically in International Accounting Standard No. 7, interest expense may be classified as operating or investing activities 3 0 depending on the reason of its incurrence. Accordingly, if interest expense is incurred to sustain the operating activities of the business, such interest is classified as an operating item. If an interest is incurred arising from the raising of financing money, such interest is classified as a financing item. Dividend income may be classified as either operating or investing activity depending on the nature of the investment from which the dividend is derived and the purpose of dividend distribution. An illustration for Cash Budget is presented in Sample Problem 3.7, Schedule 13. Schedule of Accounts Receivable Collections Credit sales are collected over a period of time. Collection patterns are to be established to more accurately estimate the inflows of cash from operations. A schedule of Accounts Receivable collections from credit sales is to be done. Total collections from receivables include those from credit customers and cash sales. Schedule of Accounts Payable Payments Credit purchases are not usually paid in the period of purchase. Normally, payments are spread over a number of months. A schedule of account payables payments is to be made to more accurately determine timing of cash outflows to merchandise suppliers. Accruals and Prepayments There are also accrued and prepaid (deferred or unearned) income and expenses. In the budgeted statement of cash flows, only the cash portion of the accrued and prepaid items are considered. Let us revisit the contents of the accrued and prepaid expenses accounts to determine the amount of expenses paid, as shown below: Accrued Expenses Prepaid Expenses - + + - PAID x Beg Bal x Beg. Bal x INCURRED x End Bal x INCURRED x PAID x Beg Bal x 3 0 Using the T-account analysis, the “expenses-paid” would be computed as: Operating expenses incurred P x Add: Accrued expenses, beg. P x Prepaid expenses, end x x Total Less: Accrued expenses, end x Prepaid expenses, beg. x  x Operating expenses paid P x In determining the amount of income received, let us also revisit the contents of accrued and deferred income accounts, as shown below. Accrued Income Deferred Income + - - + Beg. Bal x RECEIVED x EARNED x Beg Bal x EARNED x End Bal x End Bal x RECEIVED x Using the T-account analysis, the “income received” is computed as follows: Income earned P x Add: Accrued income, beg. P x Deferred income, end x x Total Less: Accrued income, end x Deferred income, beg. x  x Income received P x Operating Expenses Operating expenses budget should also be estimated in details in accordance with the principles of accrual accounting. There shall be separate budget schedules each for marketing, selling, and administrative expenses. It would be truly of great value if the expenses are further classified as direct to the segment or otherwise, and controllable or noncontrollable as to the authority of the segment manager. Operating expenses could also be classified based on the new model of business functions such as: research and development expenses, design engineering expenses, marketing 3 0 expenses, distribution expenses, and customer services expenses. The production costs are assembled, grouped and reported as part of the cost of goods manufactured and sold. Research and Development Leading companies in their industry or line of business, or companies that operate in a technology- based business environment, need to allocate resources for research and development to stay competitive and relevant in the upcoming period. Detailed research and development budget would provide important information to managers in their strategic and tactical decisions. Research has at least three phases: basic research, applied research, and developmental research. These researches are focused towards cost reduction, product improvements and development of new products. Distribution as to the overall budget allotment to these research phases and focuses should be clearly projected, summarized and presented. Budgeting Models There are several budgeting models used by organizations. Some examples are flexible budgeting, fixed (or static) budgeting, continuous budgeting, zero-based budgeting, life-cycle budgeting, activity-based budgeting , kaizen budgeting, and government budgeting. Flexible budgeting separates costs as to either variable or fixed. In this model, budgeted costs are determined at any level of business activity. Flexible budgeting uses standard costs to prepare budgets for multiple activity levels. Total fixed costs remain constant while total variable costs increase as production increases. The budgeted costs based on actual level of production become the standard costs and are compared with the actual costs to get and analyze cost variances. An illustration of flexible budgets follows: Sample Problem 3.2. Flexible Budgeting The Luzon Corporation has a unit direct materials cost of P 10, unit direct labor cost of P 5, unit variable overhead cost of P 4, factory rent paid of P 200,000, factory depreciation of P 400,000, and miscellaneous fixed overhead of P 100,000. The company's normal capacity which is also its maximum capacity is 20,000 units. The budgeted costs at 70%, 80%, 90%, and 100% capacity are as follows: 3 0 Fixed or static budgeting does not segregate cost into fixed and variable components. Costs are estimated only at a single level of activity. Actual cost are compared with the budgeted cost regardless of the actual level of production and cost variances are obtained and analyzed accordingly. Continuous or rolling budgeting maintains a particular time frame (or period) covered in budgeting (say 12 months). When a time segment (e.g., month) had passed, it is dropped from the budget frame and a new month is added to maintain the same period of time covered by the budget. Zero-based budgeting (ZBB) does not consider past performances in anticipating the future. Budgeted cost should be classified and packaged based on activities which must be prioritized and justified as to their incurrence. The aim is to encourage objective examination of all costs in the hope that cost could be better controlled. ZBB starts from the lowest budgetary units of the organization. It needs determination of objectives, operations, and costs for each activity and the alternative means of carrying out that activity. Different levels of service or work effort are evaluated for each activity, measurements and performance standards are established, and activities are ranked according to their importance to the activity. A decision package is prepared that describes various levels of service that may be provided, including at least one level lower than the current one. Each expenditure is justified for each budget period and costs are reviewed from a cost-benefit perspective. Life-cycle budgeting intends to account for all costs incurred in the stages of the “value chain”, from research and development to design, production, marketing, distribution, up to customer services. Costing in this model is important for pricing decisions. Revenues generated from the product should cover not only the costs of production but the entire business costs incurred. It is also analyzed in line with the product life-cycle concept where products have four life stages such as infancy (or start-up stage), growth stage, expansion stage, and maturity (or decline) stage. It is estimated that about 80% of all costs are already committed (may not yet be incurred) before the business begins. Life-cycle budgeting emphasizes the potential for locking in (designing in) future costs since the opportunity of reducing costs is great before production begins. In the whole-life cost concept, the budget includes the “after-purchase costs“ closely associated with the life-cycle cost. After-purchase costs include the costs of operating, support, repair, and disposal incurred by customers. Whole-life cost equals the life-cycle cost plus the after-purchase costs. Life-cycle costing is related to target costing and target pricing. A target price is determined in a given market condition and costs and profit margin are adjusted accordingly. 3 0 Activity-based budgeting is applied when the activity-based management system is used. It breaks down processes into activities and permits the identification of value-adding activities and their cost drivers. Activities are grouped according to their homogeneity and costs drivers are established per homogeneous pool. It tracks down cost incurrence based on the behavior of its cost driver such as number of set-ups, downtime, number of units produced, machine hours, number of employees square footage, number of kilowatt used, number of customer complaints, and many more. Kaizen (continuous improvements) budgeting assumes the continuous improvement of products or processes by way of small innovations rather than major changes. Budgets are normally not reached unless innovative improvements occur. Kaizen budgeting is based on learning curve theory where cost decreases as time passes by and experiences are gained. Kaizen is also related to product life-cycle costing. Governmental budgeting is not only a financial plan but is also an expression of public policy and a form of control having the force of the law. A government budget is a legal document, a law enacted by the congress, which must be complied with by heads and personnel of various government agencies. Since government budgeting is not profit-centered, the use of budgets in the appropriation process is of major importance. One budgeting concept in government budgeting is “line budgeting” where the emphasis is more on the control of expenditures. Each line expense should be disbursed according to the limits of the approved appropriations. APPENDIX 3.1 MASTER BUDGET SCHEDULES This section illustrates the computations, mechanics and interrelationships in a master budget. Although the illustrative data are presented separately per sample problem, they are however interrelated. The concept is to individually show budgetary computations per major account and later will be consolidated in budgeted financial statements. The data pertain to Charmaine Corporation. Sample Problem 3.3. Projected Sales and Estimated Collections from Customers Charmaine Corporation made the following projections on its sales in the coming year, 2020: Projected units sold Economy Q1 Q2 Q3 Q4 Probability Good 74,000 92,000 80,000 102,000 50% Fair 50,000 80,000 70,000 90,000 30% Bad 40,000 50,000 45,000 60,000 20% 3 0 The unit sales price is expected to be constant at P 20. All sales are made on credit. Receivables from customers are collected 60% in the quarter of sales, 30% in the quarter following sales, and 8% in the second quarter following sale. The remaining 2% is considered uncollectibles. The account receivables balance on December 31, 2019 is estimated to be P 640,000; 25% of which is coming from the 3rd quarter sales of 2019. Required: 1. Schedule 1. Projected sales in units and in pesos per quarter and for the year 2020. 2. Schedule 2. Estimated collections from customers per quarter and for the year 2020. Solutions/ Discussions: The projected sales in units are computed by considering the probability of occurrence. Expected units sold Q1 Q2 Q3 Q4 Good (projected sales x 50%) 37,000 46,000 40,000 51,000 Fair (projected sales x 30%) 15,000 24,000 21,000 27,000 Bad (projected sales x 20%) 8,000 10,000 9,000 12,000 60,000 80,000 70,000 90,000 (*) For example: Q1 (74,000 units x 50%) 37,000 units Q2 (50,000 units x 30%) 15,000 Q3 (40,000 units x 20%) 8,000 Expected sales in units 60,000 units Schedule 1. Budgeted Sales Q1 Q2 Q3 Q4 Total Budgeted sales in units 60,000 80,000 70,000 90,000 300,000 X Unit sales price P 20 P 20 P 20 P 20 P 20 Budgeted sales in pesos P 1,200,000 P 1,600,000 P 1,400,000 P 1,800,000 P 6,000,000 Schedule 2. Budgeted Collections from Customers From sales of Credit sales Q1 Q2 Q3 Q4 Total Q3, 2019 P 1,600,000 P 128,000 P 128,000 Q4, 2019 1,200,000 360,000 96,000 456,000 3 0 Q1, 2020 1,200,000 720,000 360,000 96,000 1,176,000 Q2, 2020 1,600,000 960,000 480,000 128,000 1,568,000 Q3, 2020 1,400,000 840,000 420,000 1,260,000 Q4, 2020 1,800,000 1,080,000 1,080,000 Budgeted collections from P 1,208,000 P 1,416,000 P 1,416,000 P 1,628,000 P 5,568,000 customers The collection pattern is 60% - 30% - 8%. The receivables are collected in 3 quarters. Sixty percent in the quarter of sales, thirty percent in the quarter following sales, and 8% in the second quarter following sales. The credit sales in the third quarter of year 2019 were P 1,600,000 (i.e., P 640,000 x 25% / 10%). Ninety percent (90%) of this sales has been collected at the end of 2019. Hence, to get the total sales from the third quarter of 2019, we have to divide the remaining receivable from this quarter by 10%, which is the remaining receivable balance. The credit sales in the fourth quarter of 2019 were P 1,200,000 (i.e., P 640,000 x 75% / 40%). Sixty percent (60%) of this sales has been collected by the end of 2019. As such, to get the total sales, we have to divide the remaining receivable from this quarter by 40%, which is the remaining receivable balance. Sample Problem 3.4. Budgeted Production, Materials Purchases, and Payments to Suppliers Charmaine Corporation has the budgeted units sales of its product in 2019 up to the first quarter of 2020 as follows: 2019 1st quarter 60,000 2nd quarter 80,000 3rd quarter 70,000 4th quarter 90,000 2020 1st quarter 75,000 The company has a policy of maintaining finished goods inventory equal to 20% of the next quarter’s sales and materials inventory of 30% of current quarter’s requirements. It takes 3 lbs. of material AX-23 to produce unit of product. The materials inventory at the start of the year was recorded at 75,000 pounds. Material AX-23 costs P 1.20 per pound to purchase. The terms of the purchase is 2/30, n/45. The company pays 55% of its purchases in the quarter of purchase and avail of the 2% trade discount. The remaining balance is paid in the following quarter. The accounts payables at December 31, 2019 are valued at P 81,000. Required: For the year 2020: 1. Schedule 3. Budgeted production per quarter and in total. 2. Schedule 4. Budgeted materials purchases per quarter and in total. 3. Schedule 5. Budgeted payments to merchandise suppliers. 3 0 Solutions/ Discussions: Schedule 3. Budgeted Production Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Budgeted sales in units 60,000 80,000 70,000 90,000 300,000 + Finished gods - end 16,000 14,000 18,000 15,000 15,000 Total needs 76,000 94,000 88,000 105,000 315,000 - Finished goods - beg 12,000 16,000 14,000 18,000 12,000 Budgeted sales in pesos 64,000 78,000 74,000 87,000 303,000 Finished goods-end = 20% x next quarter’s sales Q1  = 80,000 units x 20% = 16,000 units Q2s = 70,000 units x 20% = 14,000 Q3 = 90,000 units x 20% = 18,000 Q4 = 75,000 units x 20% = 15,000 Finished goods - beg = the ending of the previous quarter Q1  = 60,000 units x 20% = 12,000 units The ending inventory of the fourth quarter is the ending inventory of the year and the beginning inventory of the first quarter is the beginning of the eyar. Schedule 4. Budgeted Materials Purchases Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Budgeted production 64,000 78,000 74,000 87,000 303,000 x Standard materials per unit 3 lbs 3 lbs 3 lbs 3 lbs 3 lbs Budgeted materials usages(in 192,000 234,000 222,000 261,000 909,000 lbs) + Materials inventory - end 57,600 70,200 66,600 78,300 78,300 Total materials needs 294,600 304,200 288,600 339,300 987,300 - Materials inventory - beg 75,000 57,600 70,200 66,600 78,300 Budgeted materials purchases 174,600 246,600 218,400 272,700 912,300 (in lbs) x Materials cost per lb P 1.20 P 1.20 P 1.20 P 1.20 P 1.20 3 0 Budgeted materials purchases P 209,520 P 295,520 P 262,080 P 327,250 P 1,094,760 (in pesos) Materials inventory end = 30% x Current quarter’s needs Q1  = 192,000 units x 30% = 57,600 lbs. Q2s = 234,000 units x 30% = 70,200 Q3 = 222,000 units x 30% = 66,600 Q4 = 261,000 units x 30% = 78,300 Schedule 5. Budgeted Payments to Merchandise Suppliers To purchases Credit Q1 Q2 Q3 Q4 Total of Purchases Q4, 2019 P 180,000 P 81,000 P 81,000 Q1, 2020 209,520 112,931 P 94,284 207,215 Q2, 2020 295,520 159,501 P 133,164 292,665 Q3, 2020 262,080 141,261 117,936 259,197 Q4, 2020 327,040 176,382 176,382 Budgeted payments to P 193,931 P 253,785 P 274,425 P 294,318 P 1,016,459 merchandise supplier The payment pattern is 55% - 45%. Payments to merchandise suppliers are made in 2 quarters; fifty-five percent are paid in the quarter of purchase and forty-five percent are paid in the following quarter after purchase. The credit purchases in the fourth quarter of 2019 were P 180,000 (i.e., P 81,000 / 45%). The 55% have been paid in the quarter the purchases were made. The payment made to suppliers in the quarter of purchase accounting for 55% of all purchases is subject to 2% trade discount. Example, payment made in Q1 of 2020 for purchases made in Q1 of 2020 is P 112,931 (i.e., P 209,520 x 55% x 98%). The payment made in the following quarter accounting for the remaining 45% of the purchases is not subject to 2% trade discount. Sample Problem 3.5. Budgeted Direct Labor and Factory Overhead Charmaine Corporation pays its production personnel at a rate of P 20 per direct labor hour. It takes 0.25 standard hours to complete a finished unit. The corporation pays its labor costs in the month the payroll is recorded. The standard variable overhead rate is P 5 per direct labor hour and the standard fixed overhead rate is P 4 per direct labor hour. The company’s normal capacity is 75,000 units or 18,750 direct labor hours. Thirty percent (30%) of the total fixed overhead is non-cash. Overhead costs are paid 90%in the quarter the overhead is incurred and the remainder is paid 3 0 in the month following the quarter of incurrence. The overhead costs incurred in the fourth quarter of 2019 are P 84,000 variable and P 70,000 fixed. The budgeted production in units for 2020 are estimated at: Q1, 64,000 units, Q2, 78,000 units; Q3, 74,000 units, and Q4, 87,000 units. Required: For the year 2020: 1. Schedule 6: Budgeted labor costs per quarter and in total. 2. Schedule 7: Budgeted factory overhead in quarter and in total. 3. Schedule 8: Budgeted cash payments for labor and overhead in quarter and in total. Solutions/ Discussions: Schedule 6. Budgeted Labor Costs Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Budgeted production 64,000 78,000 74,000 87,000 303,000 X Standard direct labor 0.25 hr 0.25 hr 0.25 hr 0.25 hr 0.25 hr hours per unit Budgeted direct labor 16,000 9,500 18,500 21,750 75,750 hours X Direct labor rate per P 20 P 20 P 20 P 20 P 20 hour Budgeted direct labor cost P 320,000 P 390,000 P 370,000 P 435,000 P 1,515,000 Schedule 7. Budgeted Factory Overhead Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Variable factory overhead P 80,000 97,500 P 92,500 P 108,750 378,750 Fixed factory overhead 75,000 75,000 75,000 75,000 300,000 Budgeted factory overhead P 155,000 P 172,500 P 167,500 P 183,750 P 678,750 Variable factory overhead = Production x Variable Overhead rate per DLH Q1  = 16,000 DLH x P 5 = P 80,000 Q2s = 19,500 DLH x P 5 = 97,500 Q3 = 18,500 DLH x P 5 = 92,500 Q4 = 21,750 DLH x P 5 = 108,750 Fixed factory overhead = Normal capacity x Fixed overhead rate per DLH E.g., Q1 = 18,750 DLH x P 4 = P 75,000 3 0 Schedule 8. Budgeted cash payments to labor and overhead Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Direct labor cost P 320,000 P 390,000 P 370,000 P 435,000 P 1,515,000 Factory overhead 132,550 148,250 145,500 159,625 585,925 Budgeted payments to P 452,550 P 538,250 P 515,500 P 594,625 P 2,101,200 conversion costs a. Payments of factory overhead Amount Q1 Q2 Q3 Q4 Total Variable Overhead Q4, 2019 P 84,000 P 8,400 P 8,400 Q1, 2020 80,000 72,000 P 8,000 80,000 Q2, 2020 97,500 87,750 P 9,750 97,500 Q3, 2020 92,500 83,250 9,250 92,500 Q4, 2020 108,750 97,875 97,875 Budgeted payments to variable 80,400 95,750 93,000 107,125 376,275 overhead Cash fixed overhead Q4, 2019 (70,000x70%) P 49,000 P 4,900 P 4,900 Q1, 2020 (75,000x70%) 52,500 47,250 P 5,250 52,500 Q2, 2020 (75,000x70%) 52,500 47,250 P 5,250 52,500 Q3, 2020 (75,000x70%) 52,500 47,250 5,250 52,500 Q4, 2020 (75,000x70%) 52,500 47,250 47,250 Budgeted payments to variable 52,150 52,500 52,500 152,500 209,650 overhead Total payments to overhead P 132,550 P 148,250 P 145,500 P 159,625 P 585,925 (Thirty percent (30%) of the fixed overhead is noncash.) (Overhead is paid 90% in the quarter incurred and 10% in the succeeding quarter.) Sample Problem 6.6. Budgeted Statement of Profit or Loss Consider the data and solutions in sample problems “5.3” to “5.5”. The standard costs of Charmaine Corporation are summarized below: Units Rate Cost per unit Direct material 3 lbs. P 1,20 per lb. P 3.60 3 0  Direct labor 0.25 hr. 0.20 per hr. 0.05 Variable factory overhead 0.25 hr. 5.00 per hr. 1.25 Fixed factory overhead 0.25 hr. 4.00 per hr. 1.00 Total P 5.90 The standard costs are the same from year 2019 to 2020. The work-in-process inventories are estimated at 10% of the current production put into the process. The work-in-process on December 31, 2019 is determined at P75,000. Operating expenses are budgeted at 20% of sales in a quarter. Non-cash operating expenses including accruals and prepayments are estimated at 20% of sales. Other income from operations are projected at 5% of sales. The actual of 2019 and the estimated accrued and prepaid items in 2020 are as follows: Q4 2019 Q1 Q2 Q3 Q4 ___________________________________________________ Accrued expenses P 12,000 P 15,000 P22,000 P 14,000 P 15,000 Prepaid expenses 3,000 6,000 6,500 7,400 8,800 Accrued income 4,400 900 3,500 7,900 8,600 Prepaid income 2,100 3,300 4,400 9,700 8,200 The income tax rate is 40% Required: For the year 2020 1. Schedule 9. Budgeted cost of goods manufactured and sold. 2. Schedule 10. Budgeted statement of profit or loss. 3. Schedule 11. Budgeted cash payments to operating expenses. 4. Schedule 12. Budgeted cash receipts from other revenues. Solutions/Discussions. Schedule 9. Budgeted cost goods manufactured and sold. Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total Materials used Schedule 4 P 230,400 P 280,800 P 266,400 P 313,200 P 1,090,800 Direct labor Schedule 6 320,000 390,000 370,000 435,000 1,515,000 Factory overhead Schedule 7 155,000 172,500 167,500 183,750 678,750 ____________________________________________________________________ Total factory cost 705,400 843,300 803,900 931,950 3,284,550 +WIP inventory, beginning 75,000 64,440 84,630 80,290 3,284,550 ____________________________________________________________________ Total costs put in process 780,400 912,740 887,530 1,012,240 75,000 -WIP inventory ending 69,440 84,630 80,290 94,395 94,395 Cost of goods manufactured 710,960 828,110 808,240 917,845 3,265,155 +FG inventory, Schedule 3 70,800 94,400 82,600 106,200 70,800 beginning _____________________________________________________________________ 3 0 Total goods available for sale 781,760 922,510 890,840 1,024,045 3,335,955 -FG inventory, Schedule 2 94,400 82,600 106,200 88,500 88,500 Ending _____________________________________________________________________ Cost of goods sold Schedule 1 P 687,360 P 839,910 P 784,640 P 935,545 3,247,455 ================================================================== Material used = Materials used in units x Standard materials cost per unit Q1 = 192,000 lbs. X P1.20 = P 230,400 Q2 = 234,000 lbs. X P1.20 = P 280,800 Q3 = 222,000 lbs. X P1.20 = P 266,400 Q4 = 261,000 lbs. X P1.20 = P 313,200 The work-in-process of December 31, 2019 is the beginning work-in-process of 2020. Work-in-process inventory, ending = 10% x current production costs put into process. E.g., Q1 = P694,400 x 10% = P69,440 Finished goods inventories = FG on hand x Standard unit cost (i.e., P5.90) Units Costs ________________ _____________ FG - beg FG - end Unit Cost FG - beg FG - end ________________________________________________________________________ Q1 12,000 16,000 P 5.90 P 70,800 P 94,400 Q2 16,000 14,000 5.90 94,400 82,600 Q3 14,000 18,000 5.90 82,600 106,200 Q4 18,000 15,000 5.90 106,200 88,500 Schedule 10. Budgeted Statement of Profit or Loss Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total Sales Schedule 1 P 1,200,000 P 1,600,000 P 1,400,000 P 800,000 P 6,000,000 Cost of goods sold Schedule 9 687,360 839,910 784,640 935,545 3,247,455 -Operating expenses1 240,000 320,000 280,000 360,000 1,200,000 +other income2 60,000 80,000 70,000 90,000 300,000 ____________________________________________________________________ Income before income tax 332,640 843,300 803,900 931,950 3,284,550 -income tax (40%) 133,056 208,036 162,144 237,782 741,018 ____________________________________________________________________ Profit (loss) P 199,584 P 312,054 P 243,216 P 356,673 P 1,111,527 ================================================================= 1Operating expenses = 20% x Sales; 2Other income = 5% x Sales Schedule 11. Budgeted Cash Payments to Operating Expenses Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Operating expenses incurred P 240,000 320,000 280,000 360,000 1,200,000 + Accrued expense - beg 12,000 15,000 22,000 14,000 12,000 Prepaid expenses - end 6,000 6,500 7,400 8,800 8,800 Total 258,000 341,500 309,400 382,800 1,220,800 3 0 Less: Accrued Expenses - end 15,000 22,000 14,000 15,000 115,000 Prepaid Expenses - beg 3,000 6,000 6,500 7,400 3,000 Operating expenses paid 240,000 313,500 288,900 360,400 1,202,800 Refer to computational guidelines. The beginning accrued expenses balance in quarter 1 (i.e., P 12,000) is the beginning of the year. The ending prepaid expenses balance in quarter 4 is the ending balance of the year. Accrued expense and expense balances do not accumulate. They are continuous and are carried from one period to another. This observation is also true with regard to accrued income and deferred income. Schedule 12. Budgeted Cash Receipts from Other Revenues Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Other revenues earned P 60,000 80,000 70,000 90,000 300,000 + Accrued income - beg 4,400 900 3,500 7,900 4,400 Deferred income - end 3,300 4,400 9,700 8,200 8,200 Total 67,700 85,300 83,200 106,100 312,600 Less: Accrued income - end 900 3,500 7,900 8,600 8,600 Deferred income - beg 2,100 3,300 4,400 9,700 2,100 Other Revenues Received 64,700 78,500 70,900 87,800 301,900 Sample Problem 3.7. Budgeted Cash Flows Consider all the data and solutions in sample problems “3.3. To 3.6”. Other cash transactions and information are as follows: a. Non-current assets are to be acquired in the second and third quarters of 2020 in the amounts of P 200,000 and P 145,000, respectively. Some old non-current assets are to be sold at its book value for P 174,000 in the third quarter. b. Dividends are to be paid in February for P 400,000 and July for P 250,000. c. The minimum cash balance is set at P 400,000. In case of deficit, the corporation can avail a credit line in multiples of P 25,000 from a financing institution at a rate of 14% per annum. Interest is paid quarterly based on the outstanding balance at the beginning of the quarter. Payments to borrowings in multiples of P 25,000 are made whenever cash is available determined at the beginning of the quarter. The cash balance on January 1, 2020 is expected to equal the minimum cash balance. Required: For the year 2020: 1. Schedule 13. Cash budget 2. Schedule 14. Budgeted Statement of Cash Flows. Solutions/ Discussions: 3 0  Schedule 13. Cash Budget Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total Cash Balance - P 400,000 P 436,219 P 469,934 P 659,009 P 400,000 Add: Cash Receipts Collections from customers Schedule 12 1,208,000 1,416,000 1,416,000 1,628,000 5,668,000 From other revenues Schedule 12 64,700 78,500 70,900 87,800 301,900 Sale of noncurrent assets  174,000 174,000 Total cash available for use 1,672,700 1,930,719 2,130,834 2,372,809 6,543,900 _____________________________________________________________________ Less: Cash payment Merchandise purchases Schedule 5 (193,931) (253,785) (274,425) (294,318) (1,016,459) Direct labor Schedule 6 (320,000) (390,000) (370,000) (435,000) (1,515,000) Factory overhead Schedule 8 (132,500) (148,250) (145,500) (159,625) ( 585,925) Operating expenses Schedule 11 (240,000) (313,500) (288,900) (360,400) (1,202,800) Acquisition of noncurrent assets (200,000) (145,000) - ( 345,000) Dividends  (500,000) (250,000) - ( 750,000) Total Cash Payments (1,386,481) (1,305,535) (1,473,825) (1,249,343) (5,415,184) Cash balance before financing 286,219 625,184 657,009 1,123,466 1,128,716 Financing Cash: Borrowings (at beginning) 150,000 150,000 Payments to borrowings (at end) - (150,000) (150,000) Interests paid (at end)  - ( 5,250) ( 5,250) Net financing  150,000 (155,250) ( 5,250) Cash balance - ending 436,219 469,934 657,009 1,123,466 P 1,123,466 Cash balance - ending = Total cash available for needs - Total cash payments + Net Financing The cash balance for the year is the cash balance at the beginning of the first quarter and the ending balance of the year equals the ending balance of the fourth quarter Schedule 14. Budgeted Statement of Cash Flows Reference Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Operating activities Collections from Customers Schedule 2 P 1,208,000 P 1,416,000 P 1,416,000 P 1,628,000 P 5,668,000 From other revenue Schedule 12 64,700 78,500 70,900 87,800 301,900 To merchandise suppliers Schedule 5 (193,931) (253,785) (274,425) (294,318) (1,016,459) To direct labor Schedule 6 (320,000) (390,000) (370,000) (435,000) (1,515,000) To factory overhead Schedule 7 (132,550) (148,250) (145,500) (159,625) (585,925) To operating expenses Schedule 11 (240,000) (313,500) (288,900) (360,400) (1,202,800) Net operating inflows (outfolws) 386,219 388,965 408,575 466,457 1,649,716 3 0 Investing activities Sale of noncurrent assets - - 174,000 - 174,000 Acquisition of noncurrent assets - (200,000) (145,000) - (345,000) Net investing activities - (200,000) 29,000 - (171,000) Financing activities Dividends paid (500,000) - (250,000) - (750,000) Borrowings 150,000 - - - (150,000) Payments to borrowings - (150,000) - - (150,000) Interests paid - (5,250) - - (5,250) Net financing activities (350,000) (155,250) (250,000) - (755,250) Net cash inflows (outflows) 36,219 33,715 187,075 466,457 723,466 Add: Cash Balance - beginning 400,000 436,219 469,934 657,009 400,000 Cash balance - ending P 436,219 P 469,934 P 657,009 P 1,123,466 P 1,123,466 The business needs to borrow in the first quarter of the year to maintain the minimum cash balance of P 400,000. The amount borrowed is computed as follows: Cash balance - beginning P 400,000 Net operating cash inflows 363,769 Dividends paid  (500,000) Cash balance before financing 263,769 Minimum cash balance (400,000) Cash need P 136,231 Borrowings (in multiples of P 25,000) P  150,000 The cash balance at the end of the second quarter is P 426,869 which i P 26,869 in excess of the minimum balance of P 400,000. This excess shall be used to pay borrowing in multiples of P 25,000. The beginnng cash balance of the first quarter is the beginning cash balance of the year, and the ending cash balance of the fourth quarter is the ending cash balance of the year. References used: Agamata, Franklin T. Management Services 2019 Edition. G  IC Enterprises & Co., Inc, 2019 Cabrera, Ma. Elenita B.Management Accounting Concepts and Applications. G  IC Enterprises & Co., Inc, 2014 3 0