Académique Documents
Professionnel Documents
Culture Documents
Chapter 07
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
McGraw-Hill/Irwin
7-2
involves
involves developing
developing
objectives
objectives and
and
preparing
preparing various
various
budgets
budgets to
to achieve
achieve
those
those objectives.
objectives.
Control
Control
involves
involves the
the steps
steps taken
taken by
by
management
management to
to increase
increase
the
the likelihood
likelihood that
that the
the
objectives
objectives set
set down
down while
while
planning
planning are
are attained
attained and
and
that
that all
all parts
parts of
of the
the
organization
organization are
are working
working
together
together toward
toward that
that goal.
goal.
7-3
Advantages of Budgeting
Define goals
and objectives
Think about and
plan for the future
Communicate
plans
Coordinate
activities
Advantages
Means of allocating
resources
Uncover potential
bottlenecks
7-4
Responsibility Accounting
Managers should be
held responsible for
those items - and only
those items - that they
can actually control
to a significant extent.
7-5
2011
2012
2013
2014
Operating
Operating budgets
budgets ordinarily
ordinarily
A
continuous
budget
is
aa
A
continuous
budget
is
cover
cover aa one-year
one-year period
period
12-month
budget
that
rolls
12-month
budget
that
rolls
corresponding
to
a
companys
corresponding to a companys forward one month (or quarter)
forward one month (or quarter)
fiscal
year.
Many
companies
fiscal year. Many companies as the current month (or quarter)
as the current month (or quarter)
divide
their
annual
budget
divide their annual budget
is
is completed.
completed.
into
four
quarters.
into four quarters.
7-6
Self-Imposed Budget
Top M anagem ent
M id d le
M anagem ent
S u p e r v is o r
S u p e r v is o r
M id d le
M anagem ent
S u p e r v is o r
S u p e r v is o r
Self-Imposed Budgets
Self-imposed budgets should be reviewed
by higher levels of management to
prevent budgetary slack.
Most companies issue broad guidelines in
terms of overall profits or sales. Lowerlevel managers are directed to prepare
budgets that meet those targets.
7-9
7-10
Direct
Direct materials
materials
budget
budget
Production
Production budget
budget
Direct
Direct labor
labor
budget
budget
Selling
Selling and
and
administrative
administrative
budget
budget
Manufacturing
Manufacturing
overhead
overhead budget
budget
Cash
Cash budget
budget
Budgeted
Budgeted
income
income
statement
statement
Budgeted
Budgeted
balance
balance sheet
sheet
7-11
Budgeting Example
Royal Company is preparing budgets for the
quarter ending June 30th.
Budgeted sales for the next five months are:
April
May
June
July
August
20,000 units
50,000 units
30,000 units
25,000 units
15,000 units
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7-13
7-14
7-15
From
From the
the Sales
Sales Budget
Budget for
for April.
April.
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From
From the
the Sales
Sales Budget
Budget for
for May.
May.
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7-18
Production
Budget
7-20
7-21
March 31
ending inventory.
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7-23
From
From production
production budget.
budget.
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7-27
March 31 inventory.
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$12,000.
7-32
7-33
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of direct labor.
The company has a no layoff policy so all employees will be
layoff policy and workers are paid at the rate of $10 per hour
regardless of the hours worked.
For the next three months, the direct labor workforce will be
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7-36
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Greater
Greater of
of labor-hours
labor-hours required
required
or
or labor-hours
labor-hours guaranteed.
guaranteed.
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7-39
7-40
Direct
Direct Labor
Labor Budget.
Budget.
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* rounded
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Depreciation
Depreciation is
is aa noncash
noncash charge.
charge.
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Direct
Direct materials
materials
budget
budget and
and information.
information.
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Direct
Direct labor
labor budget.
budget.
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Production
Production Budget.
Budget.
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month.
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7-49
7-50
Maintains
Borrows
Pays
Purchases
Has
Schedule
Schedule of
of Expected
Expected
Cash
Cash Collections.
Collections.
7-53
Because
Because Royal
Royal maintains
maintains
aa cash
cash balance
balance of
of $30,000,
$30,000,
the
the company
company must
must borrow
borrow
$50,000
$50,000 on
on its
its line-of-credit.
line-of-credit.
7-55
Because
Because Royal
Royal maintains
maintains
aa cash
cash balance
balance of
of $30,000,
$30,000,
the
the company
company must
must borrow
borrow
$50,000
$50,000 on
on its
its line-of-credit.
line-of-credit.
Ending
Ending cash
cash balance
balance for
for April
April
is
is the
the beginning
beginning May
May balance.
balance.
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$50,000
$50,000 16%
16% 3/12
3/12 == $2,000
$2,000
Borrowings
Borrowings on
on April
April 11 and
and
repayment
repayment on
on June
June 30.
30.
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pl
ed
t
e
Budgeted
Income
Statement
7-60
Land - $50,000
Common stock - $200,000
Retained earnings - $146,150 (April 1)
Equipment - $175,000
7-61
7-62
Beginning balance
Add: net income
Deduct: dividends
Ending balance
$146,150
239,000
(49,000)
$336,150
7-63
End of Chapter 07
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