3.

1 explain the purpose and nature of the budgeting process

- Define the budgeting process
- Explain the purpose and benefits of budgeting process links with the
organizational objectives/strategy.
- Discuss the budgets process as planning, coordinating, motivation and
control devices.

3.2 select appropriate budgeting methods for the organisation and its needs
- Discuss all the budgets in its right order (sales budget, production budget,
direct material, direct labour and manufacturing overhead budget, debtors’
budgets, creditors’ budgets, cash budget, budgeted income statement etc.. at
least 5
- Demonstrate the achievements and limitations of the budgeting process

3.3 prepare budgets according to the chosen budgeting method

- Explain different budgeting methods (incremental or zero- based budgeting;
fixed or flexible budgeting) and give the advantages and disadvantages of
each type.
- Prepare the budgeting report in your chosen company.

3.4 prepare a cash budget

- After preparing the budgeting report in 3.3 (included cash budget), state the
consequences of its ( budget padding, budget slack)
- Example of cash budget:
 Establish company and invest $700 equity
 Purchase plain T-shirts for $5 each (100 units)
 Fixed screen cost of $100/100 units.
 Variable print cost of $0.75 per T-shirt
 Sold 25 T-shirts at $10 each for cash
 Sold 25 T-shirts at $10 each on credit
4.1 calculate variances, identify possible causes and recommend corrective action

- List out all types of variances.

- Discuss how to calculate the variances and analyse the possible causes of the
significant variances in your company.
- Suggest the corrective actions for your chosen company.

4.2 prepare an operating statement reconciling budgeted and actual results

- Reconciling the budgeted report and actual results to recognize the
effectiveness of the management (favourable or unfavourable results)
- Apply to your selected company.
Example of balance sheet and income statement
 Establish company and invest $700 equity
 Purchase plain T-shirts for $5 each (100 units)
 Fixed screen cost of $100/100 units.
 Variable print cost of $0.75 per T-shirt
 Sold 25 T-shirts at $10 each for cash
 Sold 25 T-shirts at $10 each on credit

4.3 report findings to management in accordance with identified responsibility

centres.
- After identifying the significant variances, determine which department
takes the responsibility (MPV, MQV, LRV, LEV) Chapter 5.
- Evidence about report findings and responsibility in your selected company.