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Module 4 - Background

BUDGETING, VARIANCE ANALYSIS, AND PERFORMANCE EVALUATIONS

Modular Learning Objectives

Keep the following objectives in mind as you work through the material in this module:

Define the role of budgeting in an organization.
Identify the use of budgets.
Recognize different types of budgets.
Prepare and analyze budgets.
Differentiate between a static budget and a flexible budget.
Apply variance analysis.

Required Reading

This module covers budgeting and variance analysis. Explore these topics further while keeping the above six objectives in mind. Click on the three arrows to explore each topic in more detail.

NEED TO ANSWER ALL TWO DISCUSSION QUESTIONS...also specify which answer goes to which discussion question question 1 In this discussion, please address the following:What is the most important cha 1

NEED TO ANSWER ALL TWO DISCUSSION QUESTIONS...also specify which answer goes to which discussion question question 1 In this discussion, please address the following:What is the most important cha 2

NEED TO ANSWER ALL TWO DISCUSSION QUESTIONS...also specify which answer goes to which discussion question question 1 In this discussion, please address the following:What is the most important cha 3

Check Your Understanding

Check your understanding to make sure that you have a good grasp of the background material. If you are not comfortable with the concepts, review some of the material again or go to the optional resource for more examples.

Click on the quiz icon for an ungraded, 20-question true-or-false self-study quiz to check your progress. If you are not satisfied with the score, review some of the material again. For more in-depth information, review materials listed under optional reading at the bottom of this page.

Final Thoughts

Key aspects of budgeting are planning and control. Budgets also serve as tools of communication.

Planning is crucial to an organization. It provides a framework for making decisions by establishing goals, objectives, and strategies. It is oriented toward the future and involves an awareness of how today's decisions will affect tomorrow's opportunities. Planning is essential for achieving both short- and long-run organizational goals, and successful managers are continuously planning.

Budgets are objective and are measurable. Results-oriented objectives are the foundation for controlling operations. Controls also involve the monitoring of the implementation of plans through performance reviews. They are used to compare actual results with objectives.

A flexible budget can be adjusted for changes in assumptions or variations in the level of operations. A budget can be adjusted for changes in assumptions or variations in the level of operations. Variance analysis based on flexible budgets are therefore more meaningful than those based on a static budget.

Optional Reading

For further detail refer to Dr. Walther’s accounting text and videos.

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Walther, L. (2017). Chapter 21: Budgeting—Planning for Success.