Académique Documents
Professionnel Documents
Culture Documents
Budget
a detailed plan,
expressed in
quantitative terms,
that specifies how
resources will be
acquired and used
during a specified
period of time.
Purposes of Budgeting Systems
Budget Planning
a detailed plan, Facilitating
expressed in Communication and
Coordination
quantitative terms,
Allocating Resources
that specifies how
resources will be Controlling Profit and
acquired and used Operations
during a specified Evaluating Performance
period of time. and Providing Incentives
Types of Budgets
Detail
Budget
Detail
Materials
Budget
Detail
Production
Budget
Master
Budget
Covering all Sales
phases of
a company’s
operations.
Types of Budgets
Operating Budget
Ending
Inventory
Budget Production
Work in Process Budget
and Finished
Goods
Exh.
9-1
Sales of Services or Goods
Ending
Inventory
Budget Production
Work in Process Budget
and Finished
Goods
Ending
Inventory
Budget
Direct Materials
Exh.
9-1
Sales of Services or Goods
Ending
Inventory
Budget Production
Work in Process Budget
and Finished
Goods
Cash Budget
Ending
Inventory
Budget
Direct Materials Budgeted Financial Statements
Sales Budget
Breakers, Inc. is preparing budgets for the
quarter ending June 30.
Budgeted sales for the next five months are:
April 20,000 units
May 50,000 units
June 30,000 units
July 25,000 units
August 15,000 units.
The selling price is $10 per unit.
Sales Budget
April May June Quarter
Budgeted
sales (units) 20,000 50,000 30,000 100,000
Selling price
per unit $ 10 $ 10 $ 10 $ 10
Total
Revenue $200,000 $500,000 $300,000 $1,000,000
Production Budget
Sales Production
Budget Budget
t ed
e
pl
om
C
From sales
budget
Production Budget
April May June Quarter
Sales in units 20,000
Add: desired
end. inventory 10,000
Total needed 30,000
Less: beg.
inventory
Units to be
started
Production Budget
April May June Quarter
Sales in units 20,000
Add: desired
end. inventory 10,000
Total needed 30,000
Less: beg.
inventory 4,000
Units to be
started 26,000
March 31
ending inventory
Production Budget
April May June Quarter
Sales in units 20,000 50,000
Add: desired
end. inventory 10,000
Total needed 30,000
Less: beg.
inventory 4,000
Units to be
started 26,000
Production Budget
April May June Quarter
Sales in units 20,000 50,000
Add: desired
end. inventory 10,000 6,000
Total needed 30,000 56,000
Less: beg.
inventory 4,000
Units to be
started 26,000
Production Budget
April May June Quarter
Sales in units 20,000 50,000
Add: desired
end. inventory 10,000 6,000
Total needed 30,000 56,000
Less: beg.
inventory 4,000 10,000
Units to be
started 26,000 46,000
Production Budget
April May June Quarter
Sales in units 20,000 50,000 30,000 100,000
Add: desired
end. inventory 10,000 6,000 5,000 5,000
Total needed 30,000 56,000 35,000 105,000
Less: beg.
inventory 4,000 10,000 6,000 4,000
Units to be
started 26,000 46,000 29,000 101,000
Production Budget
April May June Quarter
Sales in units 20,000 50,000 30,000 100,000
Add: desired
end. inventory 10,000 6,000 5,000 5,000
Total needed 30,000 56,000 35,000 105,000
Less: beg.
inventory 4,000 10,000 6,000 4,000
Units to be
started 26,000 46,000 29,000 101,000
Direct-Material Budget
At Breakers, five pounds of material are
required per unit of product.
Management wants materials on hand at the
end of each month equal to 10% of the
following month’s production.
On March 31, 13,000 pounds of material are on
hand. Material cost $.40 per pound.
March 31
inventory
Direct-Material Budget
Direct-Material Budget
July Production
Sales in units 25,000
Add: desired ending inventory 3,000
Total units needed 28,000
Less: beginning inventory 5,000
Production in units 23,000
Direct-Material Budget
June Ending Inventory
July production in units 23,000
Materials per unit 5
Total units needed 115,000
Inventory percentage 10%
June desired ending inventory 11,500
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.
Let’s prepare the direct-labor budget.
Direct-Labor Budget
From our
production
budget
Direct-Labor Budget
Direct-Labor Budget
Direct-Labor Budget
From our
Sales budget
Selling and Administrative
Expense Budget
Selling and Administrative
Expense Budget
Selling and Administrative
Expense Budget
Cash Receipts Budget
At Breakers, all sales are on account.
The company’s collection pattern is:
70% collected in the month of sale,
25% collected in the month following sale,
5% is uncollected.
The March 31 accounts receivable
balance of $30,000 will be collected in full.
Cash Receipts Budget
Cash Receipts Budget
Cash Receipts Budget
Cash Receipts Budget
Cash Disbursements Budget
Breakers pays $0.40 per pound for its
materials.
One-half of a month’s purchases are paid for in
the month of purchase; the other half is paid in
the following month.
No discounts are available.
The March 31 accounts payable balance is
$12,000.
Cash Disbursements Budget
Cash Disbursements Budget
From our
Overhead Budget
Cash Disbursements Budget
Continued
From our
Selling and Administrative
Expense Budget
Cash Disbursements Budget
Continued
To maintain a cash
balance of $30,000,
Breakers must borrow
$35,000 on its line of credit.
Cash Disbursements Budget
Financing and Repayment
Breakers must
borrow an
additional $13,800
to maintain a
cash balance
of $30,000.
Cash Disbursements Budget
Financing and Repayment
Cash Disbursements Budget
Continued
Cash Disbursements Budget
Continued
Cash Budgeted
Budget Income
Statement
t ed
e
pl
om
C
*rounded
Budgeted Income Statement
Breakers, Inc.
Budgeted Income Statement
For the Three Months Ended June 30
Revenue (100,000 × $10) $ 1,000,000
Cost of goods sold (100,000 × $4.60) 460,000
Gross margin $ 540,000
Operating expenses:
Selling and admin. Expenses $ 260,000
Interest expense 838
Total operating expenses 260,838
Net income $ 279,162
Budgeted Balance Sheet
Breakers reports the following account
balances on June 30 prior to preparing its
budgeted financial statements:
Land - $50,000
Building (net) - $148,000
Distribution
Preliminary
and customer
design.
service.
Detailed design
Production.
and testing.
Behavioral Impact of Budgets
Budgetary Slack: Padding the Budget
People often perceive that their performance will
look better in their superiors’ eyes if they can
“beat the budget.”
Participative Budgeting
T o p M a n a g e m e n t
M i d d l e M i d d l e
M a n a g e m e n t M a n a g e m e n
S u p e r v Si s u o p r e r v Si s u o p r e r v Si s u o p r e r v i s
Participative Budgeting
T o p M a n a g e m e n t
M i d d l e M i d d l e
M a n a g e m e n t M a n a g e m e n
S u p e r v Si s u o p r e r v Si s u o p r e r v Si s u o p r e r v i s
Expected sales xx
(+) desired closing inventory of finished goods xx
Total needs xx
(-) opening inventory of finished goods x
Units to be produced xx
Raw materials usage and purchase
budget
Raw materials needed for production xx
(+) desired closing inventory xx
Total raw materials needed xx
(-) Opening inventory xx
Raw materials to purchase xx
Comprehensive example 2
Feb Mar Apr May Jun Jul
Sales 18 000 20 000 20 000 22 000 25 000 24 000
(unit)
Sales budget
Apr May Jun Total
Sales (unit) 20 000 22 000 25 000 67 000
Total sales 100 000 110 000 125 000 335 000
(RM)
60% is paid in the current month,
30% is paid one month after the month of sale
9% is paid two month after the month of sale
1% is never paid
Sales budget
Production budget
Finished product
Total 117,200
Cost of Goods Sold Budget
RM RM
(86,850)
Cost of goods sold 572,150
Cash Budget
1st 2nd Quarter 3rd Quarter 4th Quarter
Quarter
Less: Payments
Salaries and wages 112 500 118 750 118 750 116 500
Total payments 175 000 187 500 187 500 230 500
Closing cash balance (6 250) (6 250) 6 250 52 000