Task Team of FUNdAMENTAL aCCOUNTING School of Business. Sun Yat-sen University Margin of Expected sales-Break-even sales safety, percent Expected sales Sensitivity Analysis Sensitivity analysis is used to estimate the effects of changes in variables such as sales price, variable costs, and fixed costs. CVP analysis can be used to show the effects of such changes New fixed costs break-even point in dollars New contribution margin ratio Budgeting and Budgetary Control Budgets Budgets are formal statements of a company's plans expressed in monetary terms, hich attempt to capture the future activities of an organization. They are used by businesses, not-for-profit, government, educational, and other types of organizations. The importance of budgeting include (l)defines goals and objectives; (2)promotes analysis and a focus on the future;(3) motivates employees;(4) provides a basis for evaluating erformance, (5)coordinates business activities; (6) communicates plans and instructions Budget Committee consists of managers from all departments of the organization. It provides central guidance to insure that individual budgets submitted from all departments are realistic and coordinated. Flow of budget data is a bottom-up process Budget horizons are usually for one year, but may extend for several years. The annual operating budget may be divided into quarterly or monthly budgets Rolling budgets mean that the budget may be a twelve-month budget that rolls forward on month as the current month is completed Master Budget Master budget is a formal, comprehensive plan for the future of a company. It consists of several budgets linked together to form a coordinated plan for the organizationTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University Sensitivity Analysis Sensitivity analysis is used to estimate the effects of changes in variables such as sales price, variable costs, and fixed costs. CVP analysis can be used to show the effects of such changes. Budgeting and Budgetary Control Budgets Budgets are formal statements of a company’s plans expressed in monetary terms, which attempt to capture the future activities of an organization. They are used by businesses, not-for-profit, government, educational, and other types of organizations. The importance of budgeting include (1) defines goals and objectives; (2) promotes analysis and a focus on the future; (3) motivates employees; (4) provides a basis for evaluating performance; (5) coordinates business activities; (6) communicates plans and instructions. Budget Committee consists of managers from all departments of the organization. It provides central guidance to insure that individual budgets submitted from all departments are realistic and coordinated. Flow of budget data is a bottom-up process. Budget horizons are usually for one year, but may extend for several years. The annual operating budget may be divided into quarterly or monthly budgets. Rolling budgets mean that the budget may be a twelve-month budget that rolls forward one month as the current month is completed. Master Budget Master budget is a formal, comprehensive plan for the future of a company. It consists of several budgets linked together to form a coordinated plan for the organization. Expected sales Margin of safety, percent Expected sales - Break-even sales = New contribution margin ratio New break-even point in dollars New fixed costs =