budget preparation

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Page 1: Budget Preparation
Page 2: Budget Preparation

ProductionBudget

ProductionBudget

Selling andAdministrative

Budget

DirectMaterialsBudget

DirectMaterialsBudget

DirectLabor

Budget

DirectLabor

Budget

CashBudgetCash

Budget

SalesBudgetSales

BudgetEnding

Finished GoodsBudget

Page 3: Budget Preparation
Page 4: Budget Preparation

The individual months of April, May, and June are summed to obtain the total projected sales in units

and dollars for the quarter ended June 30th

Page 5: Budget Preparation
Page 6: Budget Preparation
Page 7: Budget Preparation

Budgeted May sales 50,000

Desired ending inventory % 20%Desired ending inventory 10,000

Page 8: Budget Preparation
Page 9: Budget Preparation
Page 10: Budget Preparation
Page 11: Budget Preparation
Page 12: Budget Preparation
Page 13: Budget Preparation

March 31 inventoryMarch 31 inventory

Page 14: Budget Preparation
Page 15: Budget Preparation
Page 16: Budget Preparation
Page 17: Budget Preparation
Page 18: Budget Preparation
Page 19: Budget Preparation

Greater of labor hours requiredor labor hours guaranteed.

Page 20: Budget Preparation
Page 21: Budget Preparation
Page 22: Budget Preparation
Page 23: Budget Preparation
Page 24: Budget Preparation
Page 25: Budget Preparation

Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor Manufacturing overhead

Budgeted finished goods inventory Ending inventory in units Unit product cost Ending finished goods inventory

Page 26: Budget Preparation

Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead

Budgeted finished goods inventory Ending inventory in units Unit product cost Ending finished goods inventory

Page 27: Budget Preparation

Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead 0.05 hrs. 49.70$ 2.49

4.99$

Budgeted finished goods inventory Ending inventory in units Unit product cost 4.99$ Ending finished goods inventory

Total mfg. OH for quarter $251,000Total labor hours required 5,050

= $49.70 per hour*

Page 28: Budget Preparation

Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead 0.05 hrs. 49.70$ 2.49

4.99$

Budgeted finished goods inventory Ending inventory in units 5,000 Unit product cost 4.99$ Ending finished goods inventory 24,950$

Page 29: Budget Preparation
Page 30: Budget Preparation
Page 31: Budget Preparation
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Page 33: Budget Preparation

The cash budget is divided into four sections:

1. Cash receipts listing all cash inflows excluding borrowing;

2. Cash disbursements listing all payments excluding repayments of principal and interest;

3. Cash excess or deficiency; and

4. The financing section listing all borrowings, repayments and interest.

Page 34: Budget Preparation
Page 35: Budget Preparation

Schedule of ExpectedSchedule of ExpectedCash CollectionsCash Collections

Helen Roybark
Slide 75 Teaching Notes$X and/or XReconstruct the second sentence to read"To this amount, we add $170,000 from the expected cash collections for April sales."
Page 36: Budget Preparation

Direct LaborDirect LaborBudgetBudget

ManufacturingManufacturingOverhead BudgetOverhead Budget

Selling and AdministrativeSelling and AdministrativeExpense BudgetExpense Budget

Schedule of ExpectedSchedule of ExpectedCash DisbursementsCash Disbursements

Page 37: Budget Preparation

In the month of April will expect to have a cash deficiency of $20,000.

Page 38: Budget Preparation
Page 39: Budget Preparation
Page 40: Budget Preparation
Page 41: Budget Preparation

Royal CompanyBudgeted Income Statement

For the Three Months Ended June 30

Sales (100,000 units @ $10) 1,000,000$ Cost of goods sold (100,000 @ $4.99) 499,000 Gross margin 501,000 Selling and administrative expenses 260,000 Operating income 241,000 Interest expense 2,000 Net income 239,000$

Page 42: Budget Preparation
Page 43: Budget Preparation

Royal CompanyBudgeted Balance Sheet

June 30

Current assets Cash 43,000$ Accounts receivable 75,000 Raw materials inventory 4,600 Finished goods inventory 24,950 Total current assets 147,550 Property and equipment Land 50,000 Equipment 367,000 Total property and equipment 417,000 Total assets 564,550$

Accounts payable 28,400$ Common stock 200,000 Retained earnings 336,150 Total liabilities and equities 564,550$

Page 44: Budget Preparation

Royal CompanyBudgeted Balance Sheet

June 30

Current assets Cash 43,000$ Accounts receivable 75,000 Raw materials inventory 4,600 Finished goods inventory 24,950 Total current assets 147,550 Property and equipment Land 50,000 Equipment 367,000 Total property and equipment 417,000 Total assets 564,550$

Accounts payable 28,400$ Common stock 200,000 Retained earnings 336,150 Total liabilities and equities 564,550$

Beginning balance 146,150$ Add: net income 239,000 Deduct: dividends (49,000) Ending balance 336,150$

Page 45: Budget Preparation
Page 46: Budget Preparation

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