BUS 3304-01 Managerial Accounting

Introduction

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How do business leaders plan for the long-term future of their businesses? After the long-term decisions are made, how do business leaders track, monitor, and assess day-to-day, week-to-week, and month-to-month progress? Chapters Eight: How is Capital Budgeting Used to Make Decisions and Chapter Nine: How are Operating Budgets Created address these questions.

Reading Assignment

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Chapter Eight, How is Capital Budgeting Used to Make Decisions provides a description of one of the most used models in managerial accounting and in finance: Net present values. This chapter begins by discussing how to compute the time value of money. It then presents how this is used to analyze long-term projects. Two major models used to assess long-term projects are: (1) Net present values (NPV) and (2) Internal rate of return (IRR).

Chapter Nine, How are Operating Budgets Created, describes a major model: The master budget, which is used by business managers and leaders to monitor the operation of their business (which is why it’s called an operating budget). The master budget is consists of an array of other, smaller budgets which report on specific segments of the business.

Chapters 8 & 9 End-Of-Chapter Questions
*Please scroll down to the bottom section of this page to see last week’s end-of-chapter answers.

Discussion Assignment

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SportsMax sells sporting goods equipment at 100 stores throughout North America. Robert Manning is the manager of one SportsMax retail store in Chicago. The company is in the planning phase of establishing its operating budget for this coming year and has asked that all store managers submit their estimates of sales revenue, costs, and resulting profit. During the control phase, each store manager is evaluated by comparing budgeted profit with actual profit. Store managers who exceed budgeted profit are given a bonus equal to 10 percent of actual profit in excess of budgeted profit.

Required:
a. Describe the ethical conflict that Robert Manning is facing.
b. As the president and CEO of SportsMax, how might you motivate Robert Manning to provide an accurate operating budget?

Accounting Assignment

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Net Present Value Analysis. Architect Services, Inc., would like to purchase a blueprint machine for $50,000. The machine is expected to have a life of 4 years, and a salvage value of $10,000. Annual maintenance costs will total $14,000. Annual savings are predicted to be $30,000. The company’s required rate of return is 11 percent.

Required:
a. Ignoring the time value of money, calculate the net cash inflow or outflow resulting from this investment opportunity.
b. Find the net present value of this investment using the format presented in Figure 8.2.
c. Should the company purchase the blueprint machine? Explain.

Learning Journal

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The Learning Journal is a space where you should reflect upon what was learned during the week. How it applies to your daily life and will help you with your life (career) goals. For this week’s reflection, please describe the components of an operating budget and how the different components contribute to the overall budget.

Required Textbook and Materials: UoPeople courses use open educational resources (OER) and other materials specifically donated to the University with free permissions for educational use. Therefore, students are not required to purchase any textbooks or sign up for any websites that have a cost associated with them. The main required textbooks for this course are listed below, and can be readily accessed using the provided links. There may be additional required/recommended readings, supplemental materials, or other resources and websites necessary for lessons; these will be provided for you in the course’s General Information and Forums area, and throughout the term via the weekly course Unit areas and the Learning Guides.

• Heisinger, K., & Hoyle, J. B. (2012). Managerial Accounting. Creative Commons by-nc-sa 3.0. https://open.umn.edu/opentextbooks/textbooks/managerial-accounting