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Chapter Summary

Section 23.1: Describe How and Why Managers Use Budgets​

  • Budgets support planning, coordination, communication, motivation, and control
  • Participation improves accuracy and buy-in
  • Ethical budgeting practices are essential

Section 23.2: Prepare Operating Budgets​

  • Operating budget components include sales, production/service, materials, labor, overhead, S&A, and income statement
  • Sales budget drives all other budgets
  • Service businesses adapt budgets to service output

Section 23.3: Prepare Financial Budgets​

  • Financial budgets focus on cash, capital expenditures, and balance sheet
  • Cash budgets ensure liquidity for obligations (VAT, social charges)
  • Flexible and rolling budgets help respond to changes

Section 23.4: Prepare Operating and Financial Budgets (Integrated)​

  • Master budget integrates operating and financial plans
  • Budgets must be coordinated across departments
  • Provide comprehensive view of strategy

Section 23.5: Explain How Budgets Are Used to Evaluate Goals​

  • Budget vs. actual comparisons assess performance
  • Variance analysis identifies areas needing attention
  • Consider qualitative factors

Section 23.6: Explain How and Why a Standard Cost Is Developed​

  • Standard costs set benchmarks for cost control
  • Standards should be practical and reviewed regularly

Section 23.7: Describe How Companies Use Variance Analysis​

  • Variance analysis measures price and efficiency differences
  • Identify root causes and take corrective action

Section 23.8: Luxembourg SME Budgeting Practices​

  • Address high fixed costs, VAT, social charges, seasonality
  • Use rolling budgets, scenarios, and cash focus

Section 23.9: Luxembourg Cash Flow Budgeting for SMEs​

  • Cash budgeting ensures obligations can be met
  • Plan for VAT, social charges, taxes, and investments
  • Monitor liquidity regularly