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Pages:
3 pages/β‰ˆ825 words
Sources:
3 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Case Study
Language:
English (U.S.)
Document:
MS Word
Date:
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Topic:

Budgeting and the Budgeted Income Statement

Case Study Instructions:

Week 6 Assignment - Case on Budgeting
Overview
You are hired as a new cost accountant to Ciccetti Corporation. The company manager, David, is having a meeting with you in his office. He brought you this budgeted income statement that was completed by the previous cost accountant. David asks you to provide him with a report explaining the statement in clear, straightforward language, and how you plan to handle the annual budget.
Flexible Budget Performance Part 2
Flexible Budget Activity Variances Planning Budget
Customers served (q) 36,000 33,000
Revenue ($4.80q) $172,800 $14,400 F $158,400
Expenses:
Wages and salaries ($36,900 + 1.60q) 94,500 4,800 U 89,700
Supplies ($0.90q) 32,400 2,700 U 29,700
Insurance ($13,300) 13,300 0 13,300
Miscellaneous Expense ($6,300 + $0.40q) 20,700 1,200 U 19,500
Total expense 160,900 8,700 U 152,200
Net operating income $11,900 $5,700 F $6,200
Instructions
Write a 2–3 page report in which you:
Explain the budgeted income statement.
Outline how you would create annual budgeted financial statements.
Analyze the difference between a static budget and a flexible budget, including the importance of each.
Evaluate the importance of reading and correctly interpreting budgeted financial statements.
Use three sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.For help with research, writing, and citation, access the library, or review library guides.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
Analyze the accuracy of a business's budgeting process to help managers make effective decisions.

Case Study Sample Content Preview:

Budgeting Case Study
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Budgeting Case Study
The key role of an accountant is the preparation and interpretation of the financial statements. Regardless of the previous work conducted by the accountants, one must understand the key concepts used and any mistakes present. Besides, the accountants must consider ethical accounting principles such as integrity, honesty, and trustworthiness during the interpretation of the financial statement to other parties such as managers or supervisors (Duska et al., 2018). A budgeted income statement (BIS) is a critical financial instrument that determines the firm's stability. The paper focuses on the interpretation of BIS, annual budgeted financial statements, comparison between static and flexible budgets, and their interpretation.
Budgeted Income Statement
BIS is a critical instrument for every firm and used for estimating and evaluating the firm's expenditure and revenue. The tool is essential since it allows the companies to develop annual budgets created during the fiscal year (Bragg, 2022). The provided BIS by the previous accountant of Cicchetti Corporation is valid and coherently documented. My critical role as a new accountant is to ethically interpret it for David and ensure he understands all the figures. Before an actual understanding of the information, it is necessary to note specific letters in the BIS; for instance, A0 indicated a zero change in the activity variance. A letter F created after the activity variance shows that it is favorable. However, the letter U shows that the activity variance is unfavorable.
Additionally, it becomes easy to validate the BIS after understanding the letters. The left column represents BIS categories. There is a unique difference in the column representing flexible and planning budgets. As the name suggests, the flexible budget represents actual performance, while the planning budget is based on the projection (Radu & Giju, 2015). Therefore, the column with activity variances shows the actual and planned performance differences. The number of customers served is used in calculating the actual budget depending on the categories in the BIS. The key categories are expenses, supplies, salaries, wages, and revenues. The critical aspect taken seriously in BIS is the net operating income balance. It is achieved by subtracting the sum of the expenses from the revenue. With the provided simplification of the BIS, David can easily project the company's future. Therefore, the BIS plays a critical role in determining the annual budgeted financial statements.
Annual Budgeted Financial Statements
Creating budgeted financial statements is also a critical role of every accountant. Before I create ...
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