Управленческий учет на предприятии

The financial budget is a plan in which estimated sources of financial means and the direction of their use in future period are reflected. The financial budget includes the budget of capital expenditure, the budget of funds of the company and the budgetary balance sheet.

Budget of capital expenditure.

The budget of capital expenditure represents the plan of capital expenses with the indication of sources of financing.

In the budget of capital expenditure include as plans on acquisition of fixed assets and intangible assets, and long-term investment projects. In the latter case make separate calculations of investment projects for the purpose of determination of profitability of investments. Projects which satisfying to criteria of profitability join in the budget of capital expenditure.

Budget of money.

Drawing up the forecast of cash flows - one of the most important and difficult steps in budgeting; the sales volume forecast forms a basis for its drawing up.

It is the plan of receipt of money and payments and payments for future period of time.

As a whole this budget shows expected final balance on the account of money for the end of the budgetary period.

Receipts from primary activity calculate taking into account changes in receivables, expenses - taking into account changes in accounts payable.

Expected balance.

Shows, what means of financing the enterprise and as these means are used possesses.

Characterizes a financial condition of the enterprise for concrete date.

For the forecast of balance the size of normalized current assets and receivables size is used.

The passive part of balance is formed, proceeding from estimated turnover of accounts payable, other current liabilities and other sources of financing.

The divergence in forecasts of active and passive parts of balance gives an idea of shortage (surplus) of financing. The decision on a way of financing is made on the basis of the additional analysis.

Change of structure of balance affects cash flow.

11.5 Estimate and budget cycle

The estimate of expenses represents the consolidating plan of all expenses of the enterprise for the forthcoming period of production and financial activity. It determines total amount of costs of production by types of used resources, stages of a production activity, levels of business management and other directions of expenses. The estimate joins the expenses of the main and auxiliary production connected with production and sale to production, goods and services, and also on the maintenance of the administrative and managerial personnel, performance of various works and services, including not entering into the primary production activity of the enterprise. Planning of types of expenses is carried out in terms of money on the production programs provided in annual projects, the purposes and the tasks, the chosen economic resources and technological means of their performance. All plan targets and indicators are concretized at the enterprise in the corresponding estimates including a cost assessment of expenses and results. For example, the estimate of expenses is formed as the plan of expected expenses on different types of performed works and applied resources. The estimate of the perspective income establishes planned monetary receipts and expenses on the forthcoming period. The estimate of expenses for production shows planned levels of material stocks, outputs, cost of different types of resources, etc. The summary estimate shows all expenses and results on the main sections of the annual plan of social and economic development of the enterprise.

In the course of development of the estimate of expenses for production in domestic economic science and practice widely I apply three main methods:

1) budget method - on the basis of calculation of expenses in scales of all enterprise for data of all other sections of the plan;

2) summary method - by summation of estimates of production of separate shops, except for internal turns between them;

3) calculation method - on the basis of planned calculations for all product range, works and services with decomposition of complex articles on simple elements of expenses.

The budget method is the most widespread on the Russian industrial enterprises. Its application provides a close agreement and reduction in uniform system of calculations of a comprehensive plan. At this method all costs of production on separate elements of the estimate are according to appropriate sections of the annual plan. Order of definition of budget expenses the usually following.

1. Costs of the main materials, semi-finished products and accessories are established on the basis of the plan of annual requirement of material resources. The estimate joins only those expenses which during the planned period will be spent and are subject to write-off on production. Differently, the need for materials is accepted without change of the remains of warehouse stocks.

2. Costs of auxiliary materials also are accepted on the basis of annual plans of their requirement. It is accepted to include the cost of purchased tools spent in the planned period in structure of these expenses and invaluable economic stock.

3. Fuel cost in the estimate of expenses is planned regardless of its use in technological processes or in economic and household services. The general expenses are established without change of the remains of energy resources.

4. The cost of energy joins in the estimate of expenses a separate element only if the enterprise buys it from external suppliers. The structure of these expenses includes all types of spent energy: electric (power, lighting), the compressed air, water, gas, etc. If any type of energy is developed at the enterprise, these expenses belong on the corresponding elements of the estimate of expenses (materials, a salary, etc.).

5. The main and additional salary of all categories of the personnel is determined by operating tariff rates and salaries taking into account complexity and labor input of performed works, number and qualification of workers. Here the wages fund of not payroll working which usually is charged to the main production joins also.

On the general wages fund of the industrial and production personnel charges are planned for social needs on rates operating in the planned period.

6. Depreciation charges are intended for compensation of wear of processing equipment, industrial buildings, production constructions and other fixed assets due to prime cost of products. The general amount of depreciation charges depends on existing norms of depreciation, service life of the equipment and initial cost of the fixed business assets.

7. Other cash expenditures include the expenses which haven't been provided in the previous articles of the estimate of production. On each of articles of an other expenses it is necessary to prove the size of the corresponding expenses on existing norms or skilled data.

The developed estimate of expenses for production has to correspond also to the planned volume of realization of goods and services. If necessary correction of planned expenses taking into account change of the standard of warehouse stocks of finished goods, a work in progress, material stocks, expenses of future periods, etc. is allowed.

The summary method of drawing up the estimate of expenses for production provides preliminary development and the arch in uniform system of the general expenses on basic and production of services shops. The shop estimate of expenses joins two groups of expenses:

1) direct costs of this shop for material resources and accessories, main and additional salary, charges on payroll, depreciation charges and other cash expenditures;

2) complex expenses on services of other shops, and also shop expenses and so forth.

Development of shop estimates of expenses for production is recommended to be begun with procuring divisions of the enterprise, then non-productive departments, and after them it is necessary to pass to machining and assembly shops. The summary estimate of expenses of the enterprise is formed by summation of shop estimates with the subsequent exception of total amount of an internal turn and correction of available production stocks.

The estimate of maintenance costs and operation of the equipment includes the following articles of expenses: maintenance of cars, equipment and vehicles; costs of repair of fixed assets; operation of cars and equipment; intraeconomic movement of freights; rent for cars and the equipment; wear of invaluable and fast-wearing-out subjects; other expenses; in total according to the estimate.

Total amount of maintenance costs of the equipment and shop expenses makes the estimate of general production or all-shop expenses. The estimate of shop expenses includes articles of charges of management personnel shop, depreciation of buildings and constructions, rent of production rooms, the contents and repair of buildings, labor protection, scientific researches and invention, wear of invaluable subjects and other shop expenses.

The estimate of general running or manufacturing costs is developed at the domestic enterprises for the following articles of expenses: management personnel maintenance costs; official journeys and movements; the content of the fire, militarized and sentry protection; depreciation of fixed assets of general economy appointment; costs of repair of fixed assets; maintenance of buildings, constructions and stock of general economy appointment; production of tests, carrying out researches and maintenance of general economy laboratories; labor protection; training; rent for rooms of general economy appointment; taxes, collecting and other obligatory assignments; losses from idle times for the external reasons; information, auditor and consulting services; shortages and losses of material values in enterprise warehouses; other expenses; in total according to the estimate.

The calculation method of development of the estimate of expenses for production is based on use of the executed calculations or accounting of prime cost of all without an exception of types of production, works or the services planned in the annual production program of the enterprise, and also the remains of a work in progress and expenses of future periods. On the basis of available calculations of prime cost of separate products taking into account annual outputs the chess sheet containing all economic elements and calculation items of expenditure is developed.

After drawing up the chess table of expenses the general is developed specified, or the summary estimate of the expenses planned by the enterprise for the forthcoming period. For obtaining full prime cost of finished goods expenses on works and the services which haven't been connected with production of gross output are excluded from the general estimate, and also extra production costs are added and change of expenses of future periods is considered.

Prime cost of gross output by single-product production can form a basis for specification of costs for production of one product on a formula

Si=sval / Nr, ( 11.1)

where N - annual output of goods.

Except the considered methods of determination of product cost wide popularity and application at the domestic enterprises and foreign firms have also job order and poprotsessny accounting of expenses.

The job order method of calculation provides definition of costs for production by the separate orders, the performed works, planned contracts, etc. For each order or the contract the sheet of accounting of expenses which contains the direct and overhead costs carried on this type of works on a measure of their passing on stages of production is formed.

At poprotsessny accounting production expenses are planned on separate divisions, stages of production or productions. Full expenses are summarized according to the main items of expenditure including cost of material and a manpower, the size of general running overhead costs.

Prime cost of a unit of production is determined by these methods of calculation by division of full expenses into implementation of the corresponding order or process.

Creation of a construction object is carried out in continuous investment process from the moment of idea emergence before object delivery in operation.

Important criteria are the business plan and budget documentation according to which are estimated economic efficiency, various aspects and the opportunities put in the project, expected expenses, the income, return on investment and profit is analyzed.

The main objective of design and budget documentation are:

1. stages of design preparation of construction, order of development of coordination and adoption of justifications of investments, their structure, assessment of efficiency of investments;

2. order of development of coordination and statement of project documentation, its structure and contents, TEI (technical and economic indicators) of projects, technical and tariff rationing;

3. structure of the rule and order of development of budget documentation.

Stages of design preparation of construction:

1. Formation of an investment plan - the petition for intentions;

2. Justification of investments (development, examination, the statement) - the act of a choice of object;

3. Project documentation (development, examination, the statement) - the act of object withdrawal.

The order of development, coordination and the statement of project documentation is established «By the instruction about an order of development of coordination, the statement and structure of project documentation on construction of the enterprises, buildings and constructions». Construction Norms and Regulations 11-01-95.

Project documentation is developed mainly on a competitive basis, including through the contract auction (tenders).

The estimate - a complex of calculations for determination of the sizes of expenses necessary for construction.

According to technological structure of investments into fixed capital in the budget cost of construction allocate the following elements:

1. Cost of construction works.

2. Cost of works on installation of equipment (installation works).

3. Costs of acquisition (production) of the equipment of furniture and stock.

4. Other works and expenses.

The estimates made by the customer and the investor, can be executed by various methods depending on the contractual relations, the general economic situation and tender conditions.

Types of budget documentation:

1. Local estimates. Treats primary budget documents and is formed on separate types of works and expenses on buildings or all-areal works on the basis of volumes is defined when developing working documentation.

2. Local budget calculation. Is formed in cases when amounts of works and the sizes of expenses finally aren't defined and are subject to specification on the basis of working documentation.

3. Object estimates. Unite in the structure the cost of works on object as a whole, is formed on the basis of local estimates and treats budget documentation, on a basis by which contractual prices are formed.

4. Budget calculations on separate types of expenses. Is formed when it is required to determine as a whole by construction a limit of means of expenses necessary for compensation which aren't considered by budget standards.

5. Summary budget calculation. Make on the basis of object budget calculations, object estimates and budget calculations on separate types of works.

Methods of calculation of budget cost of construction production:

1. Resource method. This method allows to determine most precisely the budget cost of construction production for any period of time, including to consider additional costs of resources during construction implementation. Is suitable for all stages of design and budget documentation. The lack of this method - in many respects increases labor input and volume of construction documentation.

2. Resource and index. Combination of a resource method to system of indexes on a resource applied in construction. Monthly information of the centers on pricing in construction is thus used.

3. Bazisno - index. It is based on use of system of the current and expected indexes in relation to the cost of definitions in basic level. Determination of cost on this method guarantees to the customer the expenses which aren't exceeding the regional average level.

4. Analog. It is used in the presence of a databank about the cost of earlier constructed or designed objects similar projected or under construction at present.

Models of drawing up budget documentation are given in the annex No. 2 to MDS 81-35.2004.

Questions

1. Purposes and problems of planning.

2. Stages of process of planning.

3. Example of drawing up functional estimates.

4. Example of drawing up the main budget.

5 . Introduction in system of budget control.

Situational tasks

Task 1.

The following data are known:

1. 37,500 sq.m of direct materials were bought and used; purchase price made $12.40 for one sq.m;

2. Expenses of direct work made 15,250 hours, and the average rate of payment of direct work equaled $9.20 in one hour;

3.The actual OPR for the period made: $73,200 - the OPR variables and $55,000 - constant OPR.

It is required to calculate the following sizes:

1. Standard hours on the actual release.

2. Standard coefficient of constant OPR.

3. Deviation at the price of direct materials.

4. Deviation on use of direct materials.

5. Deviation on a rate of payment of direct work.

6. Deviation on productivity of direct work.

Task 2.

To make budgets of the Head, the Expert, the Accountant and the following data Lawyer:

№	Name of article of expenses	Resource	Designation	Unit cost	Quantity of units	Expense
1	Salary	Head	Salary in a month	87 000	1	87 000
		Expert		56 000	10	560 000
		Accountant		52 000	1	52 000
		Lawyer		52 000	1	52 000
	Total:					751 000
2	Tenancy	Head	м2	1 500	30	45 000
		Expert		1 500	80	120 000
		Accountant		1 500	10	15 000
		Lawyer		1 500	5	7 500
	Total:					187 500
3	Telecommunication	Head	person/hour	800	6	4 800
		Expert		800	5	4 000
		Accountant		800	4	3 200
		Lawyer		800	5	4 000
	Total:					16 000
4	electric power	Head	Kw/hour	4,1	160	656
		Expert		4,1	144	590,4
		Accountant		4,1	160	656
		Lawyer		4,1	160	656
	Total:					2 558,4
5	Computer resources	Head	resource/hour	3	110	330
		Expert		3	140	420
		Accountant		3	150	450
		Lawyer		3	120	360
	Total:					1 560

Tests

1. The budget as economic category is:

A) The plan of creation and use of financial resources for ensuring the functions which are carried out by public authorities;

B) nation-wide fund of means from which public authorities receive means for financing of the functioning;

C) the relations concerning formation and use at nation-wide and regional levels of the centralized funds intended for realization of functions of the state;

D) the generalized calculation of future expenses and expected for a covering of their income of the state balanced for the forthcoming period.

E) there is no right answer.

2. The budget of the state is a component:

A) nation-wide finance;

B) public finances;

C) international finance;

D) local finance.

E) there is no right answer.

3. What main functions of the budget of the state?

A) Redistribution of gross domestic product and national income.

B) Control of formation and use of the centralized fund of money.

C) State regulation and economy stimulation.

D) Financial security of the managing director in the society of elite.

E) Financing of national economy.

4 . The budget as the financial plan is:

A) the plan of formation and use of the centralized fund of the money established by standards of the law, necessary for implementation of tasks and state functions as a whole and local governments;

B) list of the income and state expenses which is approved by bodies of the legislative and representative power in the form of the law;

C) the plan of formation of the centralized fund of money and its use according to functions of the state and its policy.

D) Financial security

E) Financing of national economy.

5. What indicators characterize a condition of the budget as financial plan?

A) Surplus, balance, surplus, deficiency.

B) Budgetary deficiency, balance of the budget, surplus, surplus.

C) Budgetary balance, deficiency, surplus.

D) Balance of the income and budget expenses, budgetary deficiency, budgetary surplus.

E) Balance of the budget, budgetary deficiency, surplus.

6. Budgetary appropriations are a form:

A) collective capital;

B) coverings of expenses at the expense of borrowed funds;

C) coverings of expenses at the expense of own means;

D) state financial security;

D) state crediting.

Recommended literature

1. Arnold, G. Hatzopoulos, P. (2000) The theory-practice gap in capital budgeting: Evidence from the United Kingdom, Journal of Business Finance and Accounting, 27(5) (2000) 603¬626.

2. Brounen, D. De Jong, A. Koedijk, K. (2004) Corporate finance in Europe: Confronting theory with practice, Financial Management, 33(4) (2004) 71-101.

3.Graham, J. Harvey, C. (2001) The theory and practice of corporate finance: Evidence from the field, Journal of Financial Economics, 60 (2001) 187-243.

Chapter 12. Assessment of control of results of activity

12.1 Concept «the flexible budget», order of its development

The budget made in the course of planning the forthcoming calendar year, is static or fixed as pays off from a certain sales level and production. For control before analyzing deviations from the budgetary data, budgetary data have to be corrected on the corresponding actual release. The flexible (variable) budget which provides expected data for different levels of release in the relevance range (limits of usual levels of activity) is for this purpose used. By means of the flexible budget communication between the static budget and the actual results is accurately designated.

A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. The flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of activity. Variable Indirect materials Indirect work Utility costs Other Constants the Salary of controlers Depreciation Utility costs Other Total the Budget counting on the Actual costs of 19 100 units of 19 100 units 46000 75000 11 500 15 250 7 600 9 750 16.

One of the most considerable functions of effectively realized system of budgeting at the enterprise is first of all function of the analysis of deviations of the actual indicators from planned in the course of which sizes of deviations and the reason of their emergence come to light. The revealed deviations between the budgetary indicators and actual form first of all base for an assessment of activity of each center of responsibility following the results of the budgetary period and adoption of regulating decisions.

As the budgetary data include the expenses calculated for the predicted volume of realization, and actually made expenses belong to the actual volume, their comparison is incorrect. It would be unreasonable to criticize the managing director of the responsibility center that at it the actual expenses exceeded planned if such expenses grew out of excess of the actual indicator of volume of activity over put in the budget. To the contrary, if level of activity is lower, reduction of variable part of expenses is expected also. Especially actually it for the industrial enterprises, the most which part of expenses is variable (conditional and variables).

For correct comparison planned and actual indicators have to belong to one volume of realization therefore before making decisions on responsibility distribution between the allocated centers of responsibility for deviations, it is necessary to correct the budgetary data, having counted them for the actual volume of realization (sales proceeds).

The flexible budget is a performance evaluation tool. It cannot be prepared before the end of the period. A flexible budget adjusts the static budget for the actual level of output. The flexible budget asks the question: «If I had known at the beginning of the period what my output volume (units produced or units sold) would be, what would my budget have looked like?» The motivation for the flexible budget is to compare apples to apples. If the factory actually produced 10,000 units, then management should compare actual factory costs for 10,000 units to what the factory should have spent to make 10,000 units, not to what the factory should have spent to make 9,000 units or 11,000 units or any other production level.

The flexible budget variance is the difference between any line-item in the flexible budget and the corresponding line-item from the statement of actual results.

The following steps are used to prepare a flexible budget:

1. Determine the budgeted variable cost per unit of output. Also determine the budgeted sales price per unit of output, if the entity to which the budget applies generates revenue (e.g., the retailer or the hospital).

2. Determine the budgeted level of fixed costs.

3. Determine the actual volume of output achieved (e.g., units produced for a factory, units sold for a retailer, patient days for a hospital).

4. Build the flexible budget based on the budgeted cost information from steps 1 and 2, and the actual volume of output from step 3.

Flexible budgets are prepared at the end of the period, when actual output is known. However, the same steps described above for creating the flexible budget can be used prior to the start of the period to anticipate costs and revenues for any projected level of output, where the projected level of output is incorporated at step 3. If these steps are applied to various anticipated levels of output, the analysis is called pro forma analysis. Pro forma analysis is useful for planning purposes. For example, if next year's sales are double this year's sales, what will be the company's cash, materials, and labor requirements in order to meet production needs?

Pro Forma Analysis at Guess Who Jeans:

Following are pro forma monthly income statements for Guess Who Jeans, a small, start-up fashion jeans manufacturer. The pro forma analysis was prepared at the beginning of the month and considered three alternative sales levels. The company has no variable marketing costs.

Table 12.1 - The flexible budget

Income Statement line-item	Budgeted amount per unit	Pro Forma Analysis for Alternative Output Levels
		10,000 units	20,000 units	30,000 units
Revenue Variable costs: Materials Labor Overhead Total Contribution margin Fixed costs: Manufacturing Overhead Marketing costs Total fixed costs Operating income	$40 15 10 5 30 $10	$400,000 150,000 100,000 50,000 300,000 100,000 100,000 50,000 150,000 ($50,000)	$800,000 300,000 200,000 100,000 600,000 200,000 100,000 50,000 150,000 $50,000	$1,200,000 450,000 300,000 150,000 900,000 300,000 100,000 50,000 150,000 $150,000

Since by definition, fixed costs are not expected to change as volume of output changes within the relevant range, fixed costs remain the same at all three projected levels of output. Revenue and variable costs vary with output in a linear fashion. Hence, when output increases 100% from 10,000 units to 20,000 units, revenue, each line-item for variable costs, and contribution margin all increase 100%.

This purpose is served by the so-called flexible budget which provides possibility of calculation of the size of articles of expenses for different levels of revenue in the range of possible values (range of possible values is meant as set of levels of revenue with which the organization assumes to work in this temporary period) and definitions of deviations of the budgetary data from actual, caused by change of volume of revenue in comparison with the originally predicted.

In other words, the flexible budget provides interested persons with the expected data corrected on changes in level of release. Losing and analyzing various options, it is possible to choose optimum sales volume or productions.

Basis for the flexible budget is the main budget of the enterprise (the budget of the income and expenses) which is the static budget. Flexible budgeting does distinction between constants and variable expenses, allowing to recalculate thereby expected variable (conditional and variable) expenses according to the actual level of revenue. The static budget doesn't assume such adjustment.

The method of flexible budgets was widely adopted at the industrial enterprises of economically developed countries, first of all in the USA. By means of this method separate budgets for different levels of loading of the equipment and employment of workplaces are formed.

The flexible budget can be formed as the variable budget (variable budget). The flexible variable budget assumes division of expenses into variables and constants; the first are corrected depending on the output, the second remain invariable. In this regard by preparation of reports on implementation of the budget of the center of expenses it is necessary to classify costs of variables and constants. If the actual level of activity of the enterprise exceeds planned, variable expenses of this center will be big, than budgetary it is simple because of change of level of activity.

There are two methods of drawing up flexible budgets: the budget with intervals and a graphic method.

The budget with intervals in essence is set of several budgets estimated for different levels of utilization of capacity, equal, for example, 60, 70, 80, 110, 120%.

If level of loading is in an interval between values for which budgets are made, take the budget for the level of loading of power closest to the actual size and definitely correct.

However the method of budgets with an interval is rather labor-consuming. For example, if such budget consists of several separate budgets of divisions, and they, in turn, include more than 10 articles of indirect expenses and under each article for each division and for each extent of loading of power it is required to determine size, it is required to execute some thousand separate calculations.

In this regard at the large industrial enterprises it is more preferable to apply a graphic method of drawing up flexible budgets. On graphics of the flexible budget of expenses values of a level of business of firm, and down - the size of expenses across are postponed. With its help it is easy to supervise implementation of the budget as for any actual level of business according to the schedule it is possible to find the corresponding planned size of the budget.

Flexible analytical budgets.

The flexible budget can be used for the analysis of actually reached results for control of performance of a plan target and identification of deviations. It is incorrect to compare the actual expenses at one level of business to the planned expenses for other level of business. It is required to correct planned indicators, having counted them for the actual output that is reached by means of flexible budgeting.

The analysis of deviations of the actual results from the budgetary managers depending on requirements has different extent of specification. It is necessary as for an assessment of results of activity of divisions and the enterprise as a whole, and for development of the administrative decisions directed on improvement of their work.

* First level of the analysis of deviations: comparison of actual data with indicators of the static budget. Favorable the deviations causing increase in financial result, and adverse - causing its reduction are considered.

* Second level of the analysis: comparison of actual data with information of the flexible budget. The flexible budget assumes recalculation of planned indicators on the actual sales volume and helps managers to exclude influence of a factor of volume when carrying out the analysis. Having received as a result of the analysis of the second level more detailed and correct information, to the manager of the center of expenses, probably, it will want to detail it and to reveal character, the reasons and responsible for deviations not to allow adverse deviations in the future. This information can be received, having carried out the analysis of deviations of the third level.

However the method of budgets with an interval is rather labor-consuming. For example, if such budget consists of several separate budgets of divisions, and they, in turn, include more than 10 articles of indirect expenses and under each article for each division and for each extent of loading of power it is required to determine size, it is required to execute some thousand separate calculations.

In this regard at the large industrial enterprises it is more preferable to apply a graphic method of drawing up flexible budgets. On graphics of the flexible budget of expenses values of a level of business of firm, and down - the size of expenses across are postponed. With its help it is easy to supervise implementation of the budget as for any actual level of business according to the schedule it is possible to find the corresponding planned size of the budget.

Flexible analytical budgets.

The flexible budget can be used for the analysis of actually reached results for control of performance of a plan target and identification of deviations. It is incorrect to compare the actual expenses at one level of business to the planned expenses for other level of business. It is required to correct planned indicators, having counted them for the actual output that is reached by means of flexible budgeting.

The analysis of deviations of the actual results from the budgetary managers depending on requirements has different extent of specification. It is necessary as for an assessment of results of activity of divisions and the enterprise as a whole, and for development of the administrative decisions directed on improvement of their work.

* First level of the analysis of deviations: comparison of actual data with indicators of the static budget. Favorable the deviations causing increase in financial result, and adverse - causing its reduction are considered.

* Second level of the analysis: comparison of actual data with information of the flexible budget. The flexible budget assumes recalculation of planned indicators on the actual sales volume and helps managers to exclude influence of a factor of volume when carrying out the analysis. Having received as a result of the analysis of the second level more detailed and correct information, to the manager of the center of expenses, probably, it will want to detail it and to reveal character, the reasons and responsible for deviations not to allow adverse deviations in the future. This information can be received, having carried out the analysis of deviations of the third level.

Third level of the analysis: specification of deviations. At this level of the analysis make comparison of actual data with information of the flexible budget, and when comparing the actual and budgetary data it is more preferable to use standard level of planned expenses as more exact, allowing to receive objective flexible budgets. At absence at the enterprise of system of the standard accounting of expenses («standard-kost») labor input of drawing up flexible budgets considerably increases, and reliability of the corrected budgets decreases. Besides, the system of the standard account allows to carry out more detailed analysis of deviations of the actual expenses from planned therefore further for an assessment of activity we will use standard costs.

Reflection of size of deviations from norms with identification of the reasons and responsible allows to realize within the standard account the monitoring system and the production regulations, known as management by exception.

Management by exception provides control of expenses by comparison of the actual and planned results, identification of deviations and their elimination. Schemes of such look are known as control systems of feedback which assume supervision over the reached and planned results and acceptance in case of need actions on elimination of deviations. If information on indicators of budgets belongs on the responsibility centers so that the manager of this center bore responsibility for deviations from standard costs, such system is called as the accounting of responsibility.

All deviations need to be analyzed on two factors: to quantity of the consumed resource and at the price for this resource. Division of deviations into deviations at the prices and deviations by quantity of the used resource is caused by need of differentiation of influence of controlled and less controlled factors at a size of deviations. So it is considered that expeditious control of a factor of the prices is difficult as the prices are influenced by external conditions and dynamics of the market. In this regard the special attention at the enterprise is paid to control of deviations by quantity of the spent resources which reflect efficiency of their use.

It is less than expense - more income. To learn drawing up the budget, you can plan and supervise organization activity having studied the course «Budgeting and Intra Firm Planning». In it all main technologies of intra firm budgeting giving full information on a financial condition of the enterprise are considered. You can take this course as a part of the professional development program «Business planning» (the fixed curriculum from 5 courses, apprx. 3 months of training) or according to the program of individual training (time of training for a choice; personal curator; the personal curriculum from any courses).

Third level of the analysis: specification of deviations. At this level of the analysis make comparison of actual data with information of the flexible budget, and when comparing the actual and budgetary data it is more preferable to use standard level of planned expenses as more exact, allowing to receive objective flexible budgets. At absence at the enterprise of system of the standard accounting of expenses («standard-kost») labor input of drawing up flexible budgets considerably increases, and reliability of the corrected budgets decreases. Besides, the system of the standard account allows to carry out more detailed analysis of deviations of the actual expenses from planned therefore further for an assessment of activity we will use standard costs.

Reflection of size of deviations from norms with identification of the reasons and responsible allows to realize within the standard account the monitoring system and the production regulations, known as management by exception.

Management by exception provides control of expenses by comparison of the actual and planned results, identification of deviations and their elimination. Schemes of such look are known as control systems of feedback which assume supervision over the reached and planned results and acceptance in case of need actions on elimination of deviations. If information on indicators of budgets belongs on the responsibility centers so that the manager of this center bore responsibility for deviations from standard costs, such system is called as the accounting of responsibility.

All deviations need to be analyzed on two factors: to quantity of the consumed resource and at the price for this resource. Division of deviations into deviations at the prices and deviations by quantity of the used resource is caused by need of differentiation of influence of controlled and less controlled factors at a size of deviations. So it is considered that expeditious control of a factor of the prices is difficult as the prices are influenced by external conditions and dynamics of the market. In this regard the special attention at the enterprise is paid to control of deviations by quantity of the spent resources which reflect efficiency of their use.

It is less than expense - more income. To learn drawing up the budget, you can plan and supervise organization activity having studied the course «Budgeting and Intra Firm Planning». In it all main technologies of intra firm budgeting giving full information on a financial condition of the enterprise are considered. You can take this course as a part of the professional development program «Business planning» (the fixed curriculum from 5 courses, apprx. 3 months of training) or according to the program of individual training (time of training for a choice; personal curator; the personal curriculum from any courses).

Flexible (or variable) the budget is arranged for the purpose of change of all unit cost. The flexible budget is based on knowledge as the revenue or expenses behave in the range of changes. Tab. 12.1. shows how the flexible budget of Webb C0 works in the range of change of sales from 10 thousand to 14 thousand units.

As the valid sales will possibly differ from sales under the budget, the flexible budget is better, than static because it represents more options of sales volumes and gives the best chances to work correctly. The flexible budget provides data for studying of consequences of change of volumes of revenue or expenses. He helps managers to choose nature of actions when planning sales volume, and also will help in the analysis of actual data. The flexible budget - a way of an exit to level 2 analyses of deviations (see tab. 12.2).

The table 12.2-Gibky the Webb C0 firm budget for April 19. 1г.( $)

	The budgetary sum on unit	Sales levels in unit.
		10 one thousand.	12 one thousand.	14 one thousand.
gain	180	1 800 000	2 160 000	2 520 000
Variable expenses:
on the main materials	60	600 000	720 000	840 000
award, salary	16	160 000	192 000	224 000
overhead costs	12	120 000	144 000	168 000
Variable costs of production	88	880 000	1 056 000	1 232 000
Variable expenses laid on and on marketing	11	111 000	132 000	154 000
Full variable expenses	99	990 000	1 188 000	1 386 000
Corresponding income	81	810 000	972 000	1 134 000
The fixed expenses:		276 000	276 000	276 000
production laid on and marketing		434 000	434 000	434 000
the full fixed expenses		710 000	710 000	710 000
full expenses		1 700 000	1 898 000	2 096 000
operational income		100 000	262 000	424 000

The table 12.3 - Comparison of Actual Data with budgetary at different types of the budget (the analysis 2 levels) ($)

Indicators	Actual results	Variations from the flexible budget	Flexible budget	Variations of sales volumes	Static budget
	1	2	3	4	5
Sales	10 000	-	10 000	2 000	12 000
Gain	1 850 000	50 000	1 800 000	360 000	2 160 000
Variable expenses	1 120 000	130 000	990 000	198 000	1 188 000
Income	730 000	80 000	810 000	162 000	972 000
The fixed expenses	705 000	5 000	710 000	-	710 000
Operational income	25 000	75 000	100 000	162 000	262 000

Tab. 12.3 shows that radical changes of sales volume at the level of 2 conduct to decrease in the operational income for $162 000 in comparison with the earlier planned. It occurs because the sales volume decreased by 2 000 units. If the manager was guided in the activity by the static budget, decrease in the operational income would make $237000.

The first three columns of tab. 12.2 are devoted to comparison of the actual results (namely, to full revenue and full expenses) with offers on the flexible budget. The divergence can be explained with the analysis at the level of 2. First, sale price of a product increased from $180 to $185 that gave increase in revenue at $50000. However variable expenses were higher planned for $130000. A little constant expenses (increased by $5000) also. All this led to decrease in the operational income for $75000 that however is three times less than in case managers of Webb Cо follow the static main budget.

The same methodology of the analysis can be used at variations of the prices of materials, labor, manufacturing expenses, and also when using forecasts of change of expenses (for example, when using curves of training).

Systematic budgeting and tracking of expenses at stages of research and development, production, marketing, distribution and service of production gives important information for his decisions manager about a conclusion of a product to the market, to pricing on it and to determination of its relative profitability. Thus has essential value the sum of the distributed costs for all actions from entrance logistics before service at consumers.

Calculation, control and management of expenses become at skillful use by the strategic weapon in competitive fight of firm and is an example of use of economic tools at adoption of administrative decisions.

12.2 Calculation of formulas of the flexible budget

The general formula of the flexible budget defining the general budgetary expenses for any level of a production activity, it is possible to present in the following look:

I filched = Oprod + Zpost, (12.1)

where: I filched - variable costs of a unit of production;

Oprod - sales volume;

Zpost - the budgetary constant expenses.

Variable expenses of the enterprise are the expenses which sum is in linear dependence on the revenue size within the range of possible values. Constant expenses are expenses which don't depend on revenue volume within the range of possible values. Responsible services of the enterprise define what of expenses treat constants or variables. In the Russian accounting there is no similar classification of expenses. Therefore it makes sense to use for a start division of expenses on direct and indirect as a factor cost in absolute majority of cases is in essence variables, and indirect - constants.

The size of article of variable expenses in the flexible budget is calculated as:

СТ = Kzv x (VRF - VRP), (12.2)

where: СТ - the size of article of variable expenses in the flexible budget;

Kzv x - coefficient of dependence of expenses from revenue;

VRF - the actual volume of revenue;

VRP - the planned volume of revenue.

Such is the general technique of drawing up the flexible budget, used on a number of the enterprises.

The following stage - the analysis of deviations between articles of static and flexible budgets. If the actual size of variable expenses under article deviated the static budget, but doesn't exceed a planned indicator under the flexible budget, this deviation can be considered normal. Excess of expenses from planned indicators under the flexible budget for in advance defined sum (under article of expenses or across the Central federal district as a whole) is considered in details for the purpose of definition of factors of emergence of this deviation. In general, favorable it is considered a deviation making positive impact on operating profit, that is increasing it, and vice versa.

It should be noted that it is expedient to apply the instrument of flexible budgeting as well within the variation analysis, to the final adoption of the budget.

In summary we will make sequence of actions of process of formation of the flexible budget:

1. Formation of the static budget (budget of the income and enterprise expenses).

2. Definition of a format of the flexible budget including the static budget.

3. Distribution and the statement of expenses of the enterprise to constants and variables.

4. Calculation of coefficient of dependence of articles of variable expenses from revenue.

5. Filling of the flexible budget and analysis of deviations.

12.3 Updating of the budgetary data taking into account the actual output

As shows real experiment, even at the small enterprise some employees are involved in processes of planning and control (for example, the seller, the supplier, the office manager, the accountant-financier), at least. If the number of the involved experts is insignificant if these people are nearby and well know each other, organizational problems, as a rule, don't arise: thus all organizational functions are carried out usually by the specialist in finance.

On averages and especially at the large enterprises the situation looks absolutely differently. Here tens and even hundreds people, not acquaintances with each other personally are involved in process of planning. These people have different specialties and represent different divisions - financial and economic departments, supply and sale services, production sites and warehouses, distributor structures and points of retail trade. If it is a question of large corporation, holding or even it is simple about the enterprise having branches, the geographical factor starts affecting: employees are in the different cities, regions and time zones.

All this says that at the medium-sized and large enterprises process of planning and budgeting needs the special organization including special bodies of management, accurately certain functions and powers of participants of process, the rule of the exchange of information, the formalized procedures of interaction.

For the organization and management of the budgetary process in the large organizations the budgetary committee headed by the representative of the top management of the company (as a rule, the chief economist or the finance director) is usually created. The structure of the budgetary committee joins heads of all (without an exception!) functional divisions of the enterprise, and also the allocated manager who is responsible for budgeting - as a rule, the skilled expert in the field of finance and management accounting.

Relationship between the employees involved in process of planning, is built in a hierarchical order (according to organizational structure of the company), and formation of plans and budgets in such hierarchical environment can be made on the basis of two main approaches - «from above - down» (top-down) and «from below - up» (bottom-up).

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