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This addresses budgets, pricing, & responsibility accounting

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(a) What is a master budget? What are some of the underlying budgets that form the master budget? What is the budgeting process at your organization? Is it effective? Why or why not?

(b)What is the difference between external and internal pricing? What factors must be considered when setting internal transfer pricing between divisions of a company? What are the different methods of setting internal transfer pricing? Which is the most effective? Why?

(c) What is responsibility accounting? For what costs should managers of responsibility centers be held accountable? What are some of the behavioral issues that surround responsibility accounting? How should these issues be addressed?

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Solution Preview

(a) The master budget is based on management's expertise and historical trend (data from previous years). The master budget forms the basis for management allocating the appropriate amount of money to each needed area (for expenses, purchases, etc.). The master budget also includes the projected amount of revenues, and comes down to the expected profit or loss for the company in the given year that is covered by the budget. The underlying budgets that form the master budget include the capital budget, which is comprised of the major asset purchases that the company plans to make, including new machinery, new vehicles, property, etc. The flexible budget is also used, which is a budget that encompasses the regular expenses of the business, and includes both fixed and variable expenses. The appropriation budget is also used, which includes amounts that are discretionary and subject to change, like amounts allocated for training, education, and advertising costs. We only use a master budget and it is relatively effective because in our organization, our costs only have a minimal amount of change from year-to-year. We are not ...

Solution Summary

The solution provides a detailed discussion for each question presented involving master budgets, internal and external pricing, and responsibility accounting.

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PLEASE DO NOT COPY AND PASTE ANY SOURCES FROM ANY SOURCES!! PLEASE INCLUDE AN INTRODUCTION AND CONCLUSION.

Part 1 DELIVERABLE LENGTH: 1-2 PAGES

Dr. Stephanie White, the Chief Administrator of Uptown Clinic, a community mental health agency, is concerned about the dilemma of coping with reduced budgets next year and into the foreseeable future, but increasing demand for services. In order to plan for reduced budgets, she must first identify where costs can be cut or reduced and still keep the agency functioning. Below are some data from the past year.

Program Area Costs
Administration
Salaries:
? Administrator $60,000
? Assistant $35,000
? Two Secretaries $42,000
Supplies $35,000
Advertising and promotion $9,000
Professional meetings/dues $14,000
Purchased Services:
? Accounting and billing $15,000
? Custodial $13,000
? Security $12,000
? Consulting $10,000
Community Mental Health Services
Salaries (two social workers) $46,000
Transportation $10,000
Outpatient mental health treatment
Salaries:
? Psychiatrist $86,000
? Two Social Workers $70,000

1. Give a dollar range of costs to reduce budgets (worst and best case analysis).
2. You need to cut $94,000 in cost. Prioritize those cuts that can be made without impacting the operation or quality care of the organization.
3. How would you advise Dr. White to prepare for reduced budgets?

PART 2 DELIVERABLE LENGTH 4 PARAGRAPHS

You have been asked to speak about the topic of responsibility centers to a group of executives at a conference.

For this speech you should select a company/business that you are familiar with and briefly describe it. Give three examples of responsibility centers in that business. Describe how these responsibility centers interact.

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