master budget of pak fan gujrat
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Wahid Industries
Master Budget
– Budgeted Procedure:
The procedure followed while designing and operating a budgetary control system depends upon the nature of the business.
The procedure as follows:
– Determination of key factor:
Key factor is that factor the extent of whose influence must first be assessed in order to ensure that functioned budgets are reasonably capable of fulfillment.
Ex: Sales, production, purchases, cash etc.
Key factor must be identified & diagnosed. Budget are meaning & unless key factor identified.
– Making of forecasts:
– Forecast is nothing but estimation of probabilities for a given period. Forecasts are made regarding sales, production cost and financial req.
– Preparation of budgets:
After finalization of forecasts the budgets will be prepared.
Master BudgetMaster Budget
Operating Budget
Sales Budget
Production Budget
Direct Material Budget
Direct Labor Budget
FOH Budget
Selling & Admin Budget
Collections Budget
Financial Budget
Schedule of Cash Receipts
Cash Budget
Master Budget
Operating Budget
Sales Budget
Production Budget
Direct Material Budget
Direct Labour Budget FOH Budget Sellin & Admin
Budget
Collections Budgt
Financial Budget
Budgeted Income Statement Schedule of Cash Receipts
Cash Budget
Operating Budget– . It contains estimates of the total value of resources required for the
performance of the operation including reimbursable work or services for others.
– There are following types of operating budget:
– Sales Budget
– Production Budget
– Direct Material Budget
– Direct Labour Budget
– Factory Overhead Budget
– Selling & Administrative Budget
Sales Budget
Sales budget is the first and basic component of master budget and it shows the expected number of sales units of a period and the expected price per unit. It also shows total sales which are simply the product of expected sales units and expected price per unit.
Sales BudgetPak Fan(Ceiling Fan)
Description Quarter 1 Quarter 2 Quarter 3
Quarter 4
Total
Sales Units 729 1,062 310 270 2371
Price Per Unit
2,700 2,700 2,700 2,700 2,700
Total sale 1,968,300 2,867,400 837,000 729,000 6,401,700
Production BudgetThis budget shows the number of units of each good
expected to be produced.
Production budget is a schedule showing planned production in units which must be made by a manufacturer during a specific period to meet the expected demand for sales and the planned finished goods inventory
Production Budget of Deluxe Ceiling Fan
Production BudgetDescription Q1 Q2 Q3 Q4 TotalBudgeted Sales 729 1062 310 270 2371
Ending 318 93 81 218 218Available for Production
1047 1155 391 488 2589
Less Opening 190 318 93 81 190Units To be Produced
857 837 298 407 2399
Direct Materials Budget Direct material purchases budget shows budgeted beginning and ending
direct material inventory, the quantity of direct material that will be used in production, the amount of direct material that must be purchased and its cost during a specific period
The direct material includes
1 Rod
1 Motor
3 Blades
Misc.
We assume these 4 items as 1 unit.
Description Q1 Q2 Q3 Q4 TotalFans 839 962 210 320 2331Direct Material per Fan
1 1 1 1 1
Total Units Material Required
839 962 210 320 2331
Production BudgetColumn1 Q1 Q2 Q3 Q4 Total
Total Material Required
857 837 298 407 2399
Add Ending 288 89 122 257 150Material Available 1145 926 420 664 2549
Less Opening 255 288 89 122 255Direct Material
Used890 638 331 542 2294
Material Cost Per Unit
1535 1535 1535 1535 1535
Total Cost Of Material
1366150 979330 508085 831970 3521290
Direct Labor BudgetDirect labor budget shows the total direct labor cost and
number of direct labor hours needed for production. It helps the management to plan its labor force requirements. Direct labor budget is a component of master budget. It is prepared after the preparation of production budget because the budgeted production in units figure provided by the production budget serves as starting point in direct labor budget.
The company pays wages to its employees on the bases of number of units produced, The total wages from all departments is Rs.130 per unit.
Direct Labor Budget
Labor
Description Q1 Q2 Q3 Q4 Total
Units Produced 857 837 298 407 2399
Wages Per Unit 130 130 130 130 130
Total Direct Labor Cost
111410 108810 38740 52910 311870
Manufacturing Overhead Budget
The factory overhead budget shows all the planned manufacturing costs which are needed to produce the budgeted production level of a period, other than direct costs which are already covered under direct material budget and direct labor budget. The overhead budget is an operational budget contained in the master budget of a business. It has two sections, one for variable overhead costs and other for fixed overhead costs.
Manufacturing Overheads Budget
Manufacturing Overhead BudgetDescription Q1 Q2 Q3 Q4 Total
No. Units 839 962 210 320 2331
Variable Rate x40 x40 x40 x40 x40
Total Variable 33560 38480 8400 12800 93240
Fixed FOH +96040 +96040 +96040 +96040 +372960
Total FOH 129600 134520 104440 108840 466200
Selling & Admin. Budget
Selling and administrative expense budget is a schedule of planned operating expenses other than manufacturing costs. It is a component of master budget and it is prepared by all types of businesses (i.e. manufacturers, retailers and service providers) before the preparation of budgeted income statement.
Selling & Admin. BudgetSelling And Admin
Description Q1 Q2 Q3 Q4 Total
Budgeted Sales 729 1062 310 270 2371
Variable Rate 25 25 25 25 25
Variable Selling And Admin
18225 26550 7750 6750 59275
Fixed Selling & Admin
59275 59275 59275 59275 237100
Total 77500 85825 67025 66025 296375
Financial budget
Definition: Financial budgets are financial plans that are structured to detail projections on incomes and expenses on both a long-term and a short-term basis. Budgets of this type normally incorporate aspects of other types of budgeting strategies, including the preparation of a detailed budgeted balance sheet, a section that functions as a cash flow budget and addresses the receipt of income and the flow of expenses on an annual, semi-annual, and a monthly basis. It typically covers a period of at least one year, although it is not unusual for some organizations to prepare this kind of budget to cover anywhere from two to five years at a time.
Schedule of Expected Cash Collections
Schedule of expected cash collections from customers shows the budgeted cash collections on sales during a period. It is a component of master budget and it is prepared after the preparation of sales budget and before the preparation of cash budget.
Schedule of Expected Cash ReceiptsDescription Q1 Q2 Q3 Q4 Total
Sales 729 1062 310 270 2371
Total Receivables 1968300 2867400 837000 729000 6401700
Cash Payment 984150 1433700 418500 364500 3200850
25% of previous Quarter - 492075 716850 209250 1418175
25% of preceding 2nd - - 492075 716850 1208925
Total Receipts of Quarter 2952450 4793175 2464425 2019600 12229650
Cash Budget
Cash budget is a financial budget prepared to calculate the budgeted cash inflows and outflows during a period and the budgeted cash balance at the end of the period. Cash budget helps the managers to determine any excessive idle cash or cash shortage that is expected during the period.
Cash BudgetCash Budget
Description Q1 Q2 Q3 Q4 TotalOpening Balance 3000000 3665340 7403940 1886510 5000000
Cash Receipts 2952450 4793175 2464425 2019600 12229650
Total Cash Available
5952450 8458515 9868365 3906110 17229650
Less Payments 2287110 1054575 367615 784415 4493715
Exess or Shortage 3665340 7403940 9500750 3121695 12735935
Financing - - - - -
Repayment - - - - -
Excess 3665340 7403940 1886510 3358615 12735935
Budgeted Income StatementThe budgeted or pro forma income statement is
prepared after the operating budgets have been completed. The cost of goods sold on the income statement is calculated using the per unit cost of Rs.1795.857 , which consists of Rs.1535 per unit for direct materials, Rs.130.00 per unit for direct labor, and a manufacturing overhead rate of Rs.40.00 . Fixed factory overheads were Rs.96040 per quarter.
Budgeted Income StatementBudgeted Income Statement
Description RSSales 2371x2700 6401700Less CGS -4186140Gross Profit 2215560
Sellin and Admin -296375
Net Profit 1919185
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