Académique Documents
Professionnel Documents
Culture Documents
Profit Planning
and
Activity-Based
Budgeting
McGraw-Hill/Irwin
Learning
Objective
1
9-2
1. Planning
2. Facilitating
Communication and
Coordination
3. Allocating Resources
4. Controlling Profit and
Operations
5. Evaluating
Performance and
Providing Incentives
9-3
Types of Budgets
Materials
Production
Covering all
phases of
a companys
operations.
Sales
Master
Budget
Detail
Budget
Detail
Budget
Detail
Budget
9-4
Types of Budgets
Income
Statement
Budgeted
Financial
Statements
Balance
Sheet
Statement of
Cash Flows
9-5
Types of Budgets
Capital
Capital budgets
budgets with
with acquisitions
acquisitions
that
that normally
normally cover
cover several
several years.
years.
Financial
Financial budgets
budgets with
with financial
financial
resource
resource acquisitions.
acquisitions.
2001
2002
This
This budget
budget is
is usually
usually aa twelve-month
twelve-month
budget
budget that
that rolls
rolls forward
forward one
one month
month
as
as the
the current
current month
month is
is completed.
completed.
9-6
Learning
Objective
2
9-7
Production
Budget
Work in Process
and Finished
Goods
Ending
Inventory
Budget
Direct Materials
Direct
Materials
Budget
Direct
Labor
Budget
Overhead
Budget
Cash Budget
Selling and
Administrative
Budget
Budgeted Income
Statement
Budgeted Balance
Sheet
Budgeted Statement
of Cash Flows
9-8
Learning
Objective
3
9-9
Resources
Resources
Activity-Based
Activity-Based
Costing
Costing (ABC)
(ABC)
Activities
Activities
Cost
Cost objects:
objects:
products
products and
and services
services
produced,
produced, and
and
customers
customers served.
served.
Activities
Activities
Activity-Based
Activity-Based
Budgeting
Budgeting (ABB)
(ABB)
Forecast
Forecast of
of products
products
and
and services
services to
to be
be
produced
produced and
and
customers
customers served.
served.
9-10
Learning
Objective
4
9-11
Sales Budget
Breakers,
Breakers, Inc.
Inc. is
is preparing
preparing budgets
budgets for
for the
the quarter
quarter
ending
ending June
June 30.
30.
Budgeted
Budgeted sales
sales for
for the
the next
next five
five months
months are:
are:
April
20,000
April
20,000 units
units
May
50,000
May
50,000 units
units
June
30,000
June
30,000 units
units
July
25,000
July
25,000 units
units
August
15,000
August
15,000 units.
units.
The
The selling
selling price
price is
is $10
$10 per
per unit.
unit.
9-12
Sales Budget
9-13
Production Budget
The
The management
management of
of Breakers,
Breakers, Inc.
Inc. wants
wants ending
ending
inventory
inventory to
to be
be equal
equal to
to 20%
20% of
of the
the following
following
months
months budgeted
budgeted sales
sales in
in units.
units.
On
On March
March 31,
31, 4,000
4,000 units
units were
were on
on hand.
hand.
Lets
Lets prepare
prepare the
the production
production budget.
budget.
9-14
From
sales
budget
Production Budget
March 31
ending inventory
9-15
Direct-Material Budget
At
At Breakers,
Breakers, five
five pounds
pounds of
of material
material are
are required
required
per
per unit
unit of
of product.
product.
Management
Management wants
wants materials
materials on
on hand
hand at
at the
the end
end
of
of each
each month
month equal
equal to
to 10%
10% of
of the
the following
following
months
months production.
production.
On
On March
March 31,
31, 13,000
13,000 pounds
pounds of
of material
material are
are on
on
hand.
hand. Material
Material cost
cost $.40
$.40 per
per pound.
pound.
Lets
Lets prepare
prepare the
the direct
direct materials
materials budget.
budget.
9-16
From our
production
budget
Direct-Material Budget
March 31
inventory
9-17
Direct-Material Budget
9-18
Direct-Labor Budget
At Breakers, each unit of product requires 0.1 hours
of direct labor.
The Company has a no layoff policy so all
employees will be paid for 40 hours of work each
week.
In exchange for the no layoff policy, workers agreed
to a wage rate of $8 per hour regardless of the hours
worked (No overtime pay).
For the next three months, the direct labor workforce
will be paid for a minimum of 3,000 hours per month.
Lets prepare the direct labor budget.
9-19
Direct-Labor Budget
From our
production
budget
Overhead Budget
Here is Breakers Overhead Budget for the quarter.
9-21
9-22
From our
Sales budget
9-23
At
At Breakers,
Breakers, all
all sales
sales are
are on
on account.
account.
The
The companys
companys collection
collection pattern
pattern is:
is:
70%
70% collected
collected in
in the
the month
month of
of sale,
sale,
25%
25% collected
collected in
in the
the month
month following
following sale,
sale,
5%
5% is
is uncollected.
uncollected.
The
The March
March 31
31 accounts
accounts receivable
receivable balance
balance of
of
$30,000
$30,000 will
will be
be collected
collected in
in full.
full.
9-24
9-25
Breakers
Breakers pays
pays $0.40
$0.40 per
per pound
pound for
for its
its materials.
materials.
One-half
One-half of
of aa months
months purchases
purchases are
are paid
paid for
for in
in the
the
month
month of
of purchase;
purchase; the
the other
other half
half is
is paid
paid in
in the
the
following
following month.
month.
No
No discounts
discounts are
are available.
available.
The
The March
March 31
31 accounts
accounts payable
payable balance
balance is
is
$12,000.
$12,000.
9-26
Cash Budget
To maintain a cash
balance of $30,000,
Breakers must borrow
$35,000 on its line of credit.
9-29
Cash Budget
Breakers must
borrow an
addition $13,800
to maintain a
cash balance
of $30,000.
9-30
Cash Budget
9-31
Cash Budget
9-32
Ending cash
balance for April
is the beginning
May balance.
Cash Budget
9-33
9-34
9-35
9-36
9-37
9-38
25%of June
sales of
$300,000
11,500 lbs. at
$.40 per lb.
5,000 units at
$4.60 per unit.
50% of June
purchases
of $56,800
9-39
Learning
Objective
5
9-40
Production
Budget
Work in Process
and Finished
Goods
Learning
Objective
6
9-42
Budget Administration
The Budget Committee is a standing
committee responsible for . . .
overall
overall policy
policy matters
matters relating
relating to
to the
the budget.
budget.
coordinating
coordinating the
the preparation
preparation of
of the
the budget.
budget.
9-43
International Aspects of
Budgeting
Firms
Firms with
with international
international operations
operations face
face special
special problems
problems
when
when preparing
preparing aa budget.
budget.
1.
1. Fluctuations
Fluctuations in
in foreign
foreign currency
currency exchange
exchange
2.
2.
3.
3.
rates.
rates.
High
High inflation
inflation rates
rates in
in some
some foreign
foreign countries.
countries.
Differences
Differences in
in local
local economic
economic conditions.
conditions.
9-44
Learning
Objective
7
9-45
Preliminary
Preliminary
design.
design.
Production.
Production.
Detailed
Detailed design
design
and
and testing.
testing.
9-46
Learning
Objective
8
9-47
9-48
Participative Budgeting
Top M anagem ent
M id d le
M anagem ent
S u p e rv is o r
S u p e rv is o r
M id d le
M anagem ent
S u p e rv is o r
S u p e rv is o r
End of Chapter 9
9-50