Accounting Chapter 9

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  1. primary benefits of budgeting
    • 1) Plan ahead
    • 2) definite objectives
    • 3) Early warning system
    • 4) Coordination of activities
    • 5) Management awareness
    • 6) Motivates personell
  2. participative budgeting
    bottom-to-top approach
  3. Operating budgets
    individual budgets that result in the preparation of the budgeted income statement establish goals for the company's sales and production personnel
  4. financial budgets
    capital expenditure budget, the cash budget, and the budgeted balance sheet focus primarily on the cash resources needed to fund expected operations and planned capital expenditures
  5. sales budget
    derived from the sales forecast
  6. Production budget
    shows the units to produce to meet anticipated sales.
  7. Required production units (Production budget)
    • bdgtd sales unts + dsrd end fin goods unts - beg fin goods unts
    • dsrd fin good = % of nxt qtr budgtd sales (15% 20000)
    • beg fin good = % of budget sales for qtr (15% 15000)
  8. Direct materials budget
    shows quantity and cost of direct materials to be purchased
  9. Required DM units to be purchased (Direct materials budget)
    • DM units rqrd for prod + Dsrd end DM units - Beg DM units
    • Units to be produced = requiuired production units
    • dsrd end dm = est nxt qtr prod rqrd x %
    • Beg DM = curnt qtr pounds needed x %
  10. Direct labor budget
    qty (hours) & cost of DL ncsry to meet production rqrmnts
  11. Total direct labor cost (Direct labor budget)
    units to be prdcd x DL time per unit x DL cost per hour
  12. Manufacturing overhead budget
    • shows expected mfg overhead costs for the budget period
    • distinguishes between variable and fixed overhead costs
    • Mfg OH rate per DL hour = $246,400 / 30,800 = 8
  13. Selling and administrative expense budget.
    budget projects anticipated selling and administrative expenses for the budget period. This budget also classifies expenses as either variable or fixed
  14. Budgeted income statement
    End-product of the operating budgets. tindicates expected profitability of operations for the budget period.basis for evaluating company performance - act as a call to action
  15. Cash budget
    shows anticipated cash flows considered most important financial budget contains 3 sections:cash receipts, cash disbursements, and financing) and beg/ending cash balances
  16. Budgeted balance sheet
    projection of financial position at end of the budget period. is developed from the budgeted balance sheet for the preceding yearand the budgets for the current year
  17. Differences of Master budgets merchandiser/manufacturer
    • 1. Merchandiser uses a merchandise purchases budget instead of a production budget.
    • 2. A merchandiser does not use themanufacturing budgets (direct materials, direct labor, and manufacturingoverhead).
  18. Merchandise purchases budget
    Shows the est COG to be purchased to meet expected sales
  19. Req Mercandise Purchases (Merchandise purchases budget )
    • Budg COGS + Dsrd end Merch Inv - Beg Merch Inv
    • BCOGS = COGS % of sales ex: 70% of $300,000
    • Dsrs end = % of bud sales for nxt mnth ex:30% of $240,000
    • Beg Inv = % of bud COGS crnt mnth ex: 30% of $210,000
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Accounting Chapter 9
2012-04-11 17:23:35

Chapter 9
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