c h a p t e r 5 operational budgets. learning objective 1 describe the importance of personal...
TRANSCRIPT
![Page 1: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/1.jpg)
C H A P T E R 5
Operational BudgetsOperational Budgets
![Page 2: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/2.jpg)
Learning Objective 1
Describe the importance of personal budgeting.
![Page 3: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/3.jpg)
What are the Purposes of Budgeting ?
OVERALL PURPOSE:
![Page 4: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/4.jpg)
Define Disposable Income
![Page 5: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/5.jpg)
What are the Characteristics of Good Personal Budgeting?
![Page 6: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/6.jpg)
Example: Monthly Budget
Gross salary. . . . . . . . . . . . . . . $2,000 Withholdings: Federal income taxes . . . . . . . $250 State income taxes . . . . . . . . . 150 Other withholdings. . . . . . . . . . 150 (550) Net take-home pay . . . . . . . $1,450 Fixed expenses: House mortgage expense. . . . $450 Car payment expense. . . . . . . 250 Insurance expense . . . . . . . . . 100 (800) Disposable income. . . . . . . . $ 650 Utilities expense . . . . . . . . . . . . $ 65Food expense. . . . . . . . . . . . . . 200Miscellaneous expenses. . . . . . 350 (615)
Net surplus. . . . . . . . . . . . . . $ 35
![Page 7: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/7.jpg)
Learning Objective 2
Identify the purposes of budgeting for organizations.
![Page 8: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/8.jpg)
Describe Two Types of Planning
![Page 9: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/9.jpg)
List Reasons for Budgeting
![Page 10: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/10.jpg)
Learning Objective 3
Explain the budgeting process and its behavioral implications in organizations.
![Page 11: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/11.jpg)
Budgeting Process
Who or what is the budget committee?
What are two issues of the budgeting process?
![Page 12: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/12.jpg)
List Behavioral Considerations
1.
2.
3.
![Page 13: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/13.jpg)
Describe the Top-Down Approach to Budgeting
TopManagement
Manager ManagerManager
![Page 14: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/14.jpg)
Describe the Bottom-Up Approach to Budgeting
TopManagement
Manager ManagerManager
![Page 15: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/15.jpg)
Learning Objective 4
Construct an operating budget and it components for manufacturing firms.
![Page 16: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/16.jpg)
Master Budget—Manufacturing
Sales Budget*
Selling/Admin.Expense Budget*
Production Budget
Direct Labor
Budget*
ManufacturingOverhead Budget*
Direct Materials Budget*
Budgeted Income Statement
BudgetedBalance Sheet
BudgetedCash Flows
Cash BudgetCapital Expenditures Budget
Operating Budget
Capital Project Plans
Short-TermObjectives
Strategic Goalsand Plans
BudgetedProduct Sheet
* These budgets all flow into the cash budget below.
Planning Process
Financial Budgeting* ***
![Page 17: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/17.jpg)
Sales Budget
Master Budget—ManufacturingDefine each budget.
![Page 18: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/18.jpg)
Example: Sales Budget
Selling price per bike . . . . . . $ 100
Expected sales (units). . . . . x 100
Expected revenues . . . . . . . $10,000
Selling price per bike . . . . . . $ 100
Expected sales (units). . . . . x 100
Expected revenues . . . . . . . $10,000
![Page 19: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/19.jpg)
Sales Budget
Production Budget
Master Budget—ManufacturingDefine each budget.
![Page 20: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/20.jpg)
Example: Production Budget
Expected sales. . . . . . . . . . . . . . . 100
Add desired ending inventory. . . . 105
Total number of bikes needed . . 205
Less beginning inventory . . . . . . . 70
Bikes to be produced . . . . . . . . . . 135
Expected sales. . . . . . . . . . . . . . . 100
Add desired ending inventory. . . . 105
Total number of bikes needed . . 205
Less beginning inventory . . . . . . . 70
Bikes to be produced . . . . . . . . . . 135
Note: Ending inventory is estimated at 80% of the next period’s sales.
![Page 21: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/21.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Master Budget—ManufacturingDefine each budget.
![Page 22: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/22.jpg)
Example: Direct Materials Budget
Direct materials usage:
Direct Amount Unit TotalMaterials Required Cost Cost
Metal 2,700 lbs. $2.00/ft. $5,400
Plastic 405 lbs. $1.00/ft. $ 405
Direct materials usage:
Direct Amount Unit TotalMaterials Required Cost Cost
Metal 2,700 lbs. $2.00/ft. $5,400
Plastic 405 lbs. $1.00/ft. $ 405
![Page 23: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/23.jpg)
Example: Direct Materials Budget
Direct materials purchases: Metal Plastic
Desired ending inventory. . . . . 2,100 315
Needed for production. . . . . . . 2,700 405
Total needed . . . . . . . . . . . . . . 4,800 720
Less beginning inventory. . . . . 2,800 210
Materials to be purchased . . . . 2,000 510
Unit cost. . . . . . . . . . . . . . . . . . x $2 x $1
Total cost . . . . . . . . . . . . . . . . $4,000 $ 510
Direct materials purchases: Metal Plastic
Desired ending inventory. . . . . 2,100 315
Needed for production. . . . . . . 2,700 405
Total needed . . . . . . . . . . . . . . 4,800 720
Less beginning inventory. . . . . 2,800 210
Materials to be purchased . . . . 2,000 510
Unit cost. . . . . . . . . . . . . . . . . . x $2 x $1
Total cost . . . . . . . . . . . . . . . . $4,000 $ 510
![Page 24: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/24.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Direct LaborBudget
Master Budget—ManufacturingDefine each budget.
![Page 25: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/25.jpg)
Example: Direct Labor Budget
Number of bikes to produce. . . . 135
Direct labor hours per bike. . . . .x 3
Total hours required. . . . . . . . . 405
Rate per hour. . . . . . . . . . . . . . . .x $5
Total direct labor cost. . . . . . . . $2,025
Number of bikes to produce. . . . 135
Direct labor hours per bike. . . . .x 3
Total hours required. . . . . . . . . 405
Rate per hour. . . . . . . . . . . . . . . .x $5
Total direct labor cost. . . . . . . . $2,025
![Page 26: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/26.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Direct LaborBudget
Manufacturing Overhead
Budget
Master Budget—ManufacturingDefine each budget.
![Page 27: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/27.jpg)
Example: Manufacturing Overhead Budget
Variable costs:Indirect materials costs. . . . . . . . . $ 220Indirect labor costs . . . . . . . . . . . . 600 Total variable costs. . . . . . . . . . . $ 820
Fixed costs:Insurance expense. . . . . . . . . . . . $ 200Depreciation expense. . . . . . . . . . 600 Total fixed costs . . . . . . . . . . . . . $ 800
Total manufacturing overhead . . . $1,620
Variable costs:Indirect materials costs. . . . . . . . . $ 220Indirect labor costs . . . . . . . . . . . . 600 Total variable costs. . . . . . . . . . . $ 820
Fixed costs:Insurance expense. . . . . . . . . . . . $ 200Depreciation expense. . . . . . . . . . 600 Total fixed costs . . . . . . . . . . . . . $ 800
Total manufacturing overhead . . . $1,620
![Page 28: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/28.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Direct LaborBudget
Manufacturing Overhead
Budget
Master Budget—ManufacturingDefine each budget.
Budgeted Product
Cost Sheet
Selling and Administrative
Expense Budget
![Page 29: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/29.jpg)
Budgeted Product Cost Sheet
Input Required Cost Cost Inputs per Bike
Metal $2.00/ft. 20 $40.00
Plastic $1.00/ft. 3 3.00
Direct labor $5.00/hr. 3 15.00
Fixed OH $1.98/hr. 3 5.94
Variable OH $2.02/hr. 3 6.06
Total variable cost per bike . . . . . $70.00
Total fixed MOH $1,620Divide by Production Volume 135 bikes
Fixed MOH cost allocated per bike 12.00
Total $82.00
Input Required Cost Cost Inputs per Bike
Metal $2.00/ft. 20 $40.00
Plastic $1.00/ft. 3 3.00
Direct labor $5.00/hr. 3 15.00
Fixed OH $1.98/hr. 3 5.94
Variable OH $2.02/hr. 3 6.06
Total variable cost per bike . . . . . $70.00
Total fixed MOH $1,620Divide by Production Volume 135 bikes
Fixed MOH cost allocated per bike 12.00
Total $82.00
![Page 30: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/30.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Direct LaborBudget
Manufacturing Overhead
Budget
Master Budget—ManufacturingDefine each budget.
Selling and Administrative
Expense Budget
![Page 31: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/31.jpg)
Example: Selling and Administrative Budget
Variable expenses:Sales commissions . . . . . . . . . . . . . . $ 400 Total variable expenses. . . . . . . . . . $ 400
Fixed expenses:Salaries expense . . . . . . . . . . . . . . . $1,000Depreciation . . . . . . . . . . . . . . . . . . . 100Advertising expense. . . . . . . . . . . . . 200 Total fixed expenses. . . . . . . . . . . . $1,300Total selling and administrative expenses. . . . . . . . . $1,700
![Page 32: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/32.jpg)
Learning Objective 5
Compare the operating budget for a manufacturing firm to that of a merchandising or service firm..
![Page 33: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/33.jpg)
Sales Budget
PurchasesBudget
BudgetedIncome
Statement
Master Budget—MerchandisingDefine each budget.
Selling and Administrative
Expense Budget
![Page 34: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/34.jpg)
Master Budget—ServiceDefine each budget.
Pro-Forma IncomeStatement
Revenue Budget
Wages andSalaries Budget
Production Budget
Cash Budget
Pro-FormaBalance Sheet
Selling/Admin.Expense Budget
OverheadBudget
SuppliesBudget
Pro-Forma Statementof Cash Flows
![Page 35: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/35.jpg)
Expanded MaterialLearning Objective 6
Create the cash budget.
![Page 36: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/36.jpg)
Sales Budget
Production Budget
Direct MaterialsBudget
Direct LaborBudget
Manufacturing Overhead
Budget
Master Budget—ManufacturingDefine each budget.
Cash Budget
Selling and Administrative
Expense Budget
![Page 37: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/37.jpg)
Example: Cash Budget
Cash balance, beginning . . . . . . . . . $ 4,900Add collections from customers . . . . 10,100(1)Total cash available. . . . . . . . . . $15,000Less disbursements for: Direct materials . . . . . . . . . . . . . $ 3,000 Direct labor. . . . . . . . . . . . . . . . . 2,000 Equipment purchase . . . . . . . . . 2,000(2)Total disbursements. . . . . . . . . . $ 7,000Minimum cash balance desired. . . . . 6,000Total cash needed. . . . . . . . . . . . . . . $13,000Excess (or deficiency) of cash available before financing. . . . . $ 2,000(3) Financing needed . . . . . . . . . . . 0
Ending cash balance [(1) – (2) + (3)] $ 2,000
![Page 38: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/38.jpg)
Expanded MaterialLearning Objective 7
Prepare pro-forma financial statements.
![Page 39: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/39.jpg)
Example: Pro-FormaIncome Statement
Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . $10,000 Cost of goods sold:Beginning finished goods inventory. . . . . . . . $ 4,900 Manufacturing costs: Direct materials used. . . . . . . . . . . . . . . . . . $ 5,805 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . 2,025 Manufacturing overhead . . . . . . . . . . . . . . . 1,620 9,450 Total cost of goods available for sale . . . . . . $14,350 Less ending finished goods inventory. . . . . . (7,350)Cost of goods sold. . . . . . . . . . . . . . . . . . . . . (7,000)Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,000 Selling and administrative expenses. . . . . . . 1,700 Operating income . . . . . . . . . . . . . . . . . . . . . $ 1,300 Interest expense . . . . . . . . . . . . . . . . . . . . . . 0 Income before taxes . . . . . . . . . . . . . . . . . . . $ 1,300
![Page 40: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/40.jpg)
ASSETS
Current assets: Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,000 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . 3,000 Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 7,350 $ 25,350Long-term operating assets: Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 12,000 Less accumulated depreciation. . . . . . . . . . . . . (3,300) 8,700
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,050
Pro-Forma Balance Sheet
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 $ 15,000
Stockholders’ equity: Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,850 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 7,200 19,050
Total liabilities and stockholders’ equity. . . . . . . . . $ 34,050
![Page 41: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/41.jpg)
Example: Pro-Forma Statement of Cash Flows
Cash flows from operating activities:Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,300 Add (subtract) adjustments:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . $ 700 Increase in finished goods . . . . . . . . . . . . (2,450)Increase in accounts receivable. . . . . . . . 5,550 3,800
Net cash provided by operating activities . . $ 5,100
Cash flows from operating activities:Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,300 Add (subtract) adjustments:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . $ 700 Increase in finished goods . . . . . . . . . . . . (2,450)Increase in accounts receivable. . . . . . . . 5,550 3,800
Net cash provided by operating activities . . $ 5,100
Cash flows from investing activities:Purchase of equipment . . . . . . . . . . . . . . $(2,000)
Net cash used in investing activities . . . . (2,000)
Cash flows from investing activities:Purchase of equipment . . . . . . . . . . . . . . $(2,000)
Net cash used in investing activities . . . . (2,000)
Cash flows from financing activities:Cash obtained from borrowing . . . . . . . . $ 7,000
Net cash used in financing activities. . . . 7,000
Net increase in cash. . . . . . . . . . . . . . . . . . $ 10,100
Cash flows from financing activities:Cash obtained from borrowing . . . . . . . . $ 7,000
Net cash used in financing activities. . . . 7,000
Net increase in cash. . . . . . . . . . . . . . . . . . $ 10,100
![Page 42: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/42.jpg)
Learning Objective 8
Distinguish between static and flexible budgets.
![Page 43: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/43.jpg)
Define Static versusFlexible Budgeting
•Static Budgeting:
•Flexible Budgeting
![Page 44: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/44.jpg)
Static Budget
Cost per unit:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . 1.20Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80Manufacturing overhead . . . . . . . . . . . . . . . . . . 0.50
Total unit cost . . . . . . . . . . . . . . . . . . . . . . . . $2.50
Budgeting production (units) . . . . . . . . . . . . . . . 5,000
Budgeted manufacturing costs:Direct materials. . . . . . . . . . . . . . . . . . . . . . $ 6,000Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . 4,000Manufacturing overhead. . . . . . . . . . . . . . . 2,500
Total manufacturing costs. . . . . . . . . . . . $12,500
![Page 45: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/45.jpg)
Static Budget—Performance Report
Actual Budgeted Difference
Production (units) 4,800 5,000 (200)
Manufacturing costs:Direct materials. . . . . . . . .$ 5,500 $ 6,000 $ (500) Direct labor . . . . . . . . . . . . 3,800 4,000 (200) Manufacturing overhead . 2,450 2,500 (50)
Total actual and budgetedmanufacturing costs . . . . $11,750 $12,500 $ (750)
![Page 46: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/46.jpg)
Flexible Budget
What are the three steps to prepare a flexible budget?
![Page 47: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/47.jpg)
Flexible Budget
Manufacturing Range of Production (units) Costs per Unit 4,800 5,000 5,200
Direct materials . $1.20 $ 5,760 $ 6,000 $ 6,240
Direct labor. . . . . . 0.80 3,840 4,000 4,160
Manufacturingoverhead. . . . . . 0.50 2,400 2,500 2,600
Total. . . . . . . . $2.50 $12,000 $12,500 $13,000
![Page 48: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/48.jpg)
Flexible Budget—Performance Report
Actual production (units) . . . . . . . . . . . . . . . . . . 4,800 Budgeted production (units) . . . . . . . . . . . . . . . 5,000 Difference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200)
Actual Budgeted Difference
Direct materials. . . . . . . . . . $ 5,500 $ 5,760 $ (260) Direct labor . . . . . . . . . . . . . 3,800 3,840 (40) Manufacturing overhead . . 2,450 2,400 50
Total costs . . . . . . . . . . . . $11,750 $12,000 $ 250
![Page 49: C H A P T E R 5 Operational Budgets. Learning Objective 1 Describe the importance of personal budgeting](https://reader030.vdocuments.site/reader030/viewer/2022032806/56649efc5503460f94c10364/html5/thumbnails/49.jpg)
Chapter 5 Managerial Accounting is Finished