CH 5:Master Budgeting Flashcards
Budget:
detailed plan for the future that is usually expressed in formal quantitative terms
period of a budget
one yr period corresponding to fiscal year
-broken into monthly/quarterly budgets
perpetual budget
rolling 12 month budget
2 purposes of budgets
-planning
-control
planning purpose of budget
developing goals and preparing various budgets to achieve these goals
control purpose of budget
gathering feedback to ensure the plan is being properly executed and modified as circumstances change
why orgs create budget for planning purpose
-define goals and objs.
-think ab plans for the future
-allocating resources
-coordinate activities
-uncover bottlenecks
-communicate plans
why orgs create budget for control purpose
-prepare budget to actual analysis
-improve efficiency/effectiveness of operations
-evaluate/reward employees
what is a self imposed budget and what is the order
budget prepared with the cooperation of mgmt from all levels
-top mgers, middle mngers, supervisors
why in a self imposed budget do they work with lower level managers
they create challenging but highly achievable goals to build LL managers confidence
Which of the following is needed to prepare a
sales budget?
The budgeted number of units to be sold
production budget layout
Budgeted unit sales
+desired units of ending finished goods inventory
=total needs
-beginning finished goods inventory
=required production in units
how to find desired unit of ending finished goods for quarter 1
quarter 1 budgeted sales X finished goods inventory percentage
how to find beginning finished goods inventory
for first quarter take from balance sheet
Q2 take desired ending finsihed goods from quarter 1
is the year colum for desired ending finished goods the sum of qaurterly amts
nope
its the same as ending finsihed goods for the 4th quarter
is the year colum for beginning finished goods the sum of qaurterly amts
nope
same as 1st quarter
Merchandise purchases budget layout
Budgeted cogs
+desired ending merch inventory
=total needs
-less beginning merch inventory
=required purchases
Direct material budget layout
Required production in units of finished goods
Units of raw materials need per unit of finished goods
Units of raw mats needed to meet production
+ desired units of ending raw mats inventory
=total units of raw materials needed
-beginning raw mats inventory
Units of raw amts to be purchased
Unit cost of raw mats
Cost of raw mats to be purchased
direct labor budget
required production
direct labor hours
=direct labor hours needed
direct labor cost per hour
=total direct labor cost
manufacturing overhead budget
budgeted directed labor hours
X variable man overhead rate per direct LH
=total variable manufautirng overhead
+fixed MO cost
=depreciation
=total cash disbursments
=MO cost per hour
S&A budget
budgeted unit sales
X variable expense per unit
=total budgeted variable s&a
fixed s&a
-depreciated
=cash s&a expenses
cash receipts
all cash inflows except
cash from financing activities.
cash disbursements
all cash payments
except payments of principal and interest
cash excess/deficency
determines if
the company will need to borrow money
or can repay money (both are Financing
Activities)
