Chapter 9- budgeting Flashcards
participative budgeting
each level of management is invited to participate
advantages: more accurate budget estimates because lower level managers have more detailed knowledge of their area.
bottom to top approach
time period budgeting
long range planning- at least 5 years
short term - at least one year
master budget
set of interrelated budgets that constitutes a plan of action for a specified time period
- operating budget
- financial budget
operating budget
individual budgets that result in the preparation of the budget income statement, establishes goals for sales and production peronnel
financial budget
the capital expenditures budgeted balance sheets- focus on cash needs to fund operational and capital expenditures
order in which budgets are prepared
- operating budget
- financial budget
sales budget
managements’s best estimate of sales revenue for the budget period. first budget prepared
sales budget formula
expected unit sales volume for each product X anticipated unit selling price
production budget
shows units that must be prepared to meet anticipated sales
required production units formula
budgeted sales units + desired ending finished goods units - beginning finished goods units
direct materials budget
shows both the quantity and cost of direct materials to be purchased
- direct materials units to be purchased formula
direct materials units required for production + desired ending direct materials units - beginning direct materials units
- budgeted cost of direct materials to be purchased=
required unit of direct materials X anticipated cost per unit
direct labor budget
shows both the quantity hrs and cost of direct labor necessary to meet production requirements
direct labor budget formula
total direct cost=
units to be produced X direct labor time per unit X direct labor cost per hr
budget income statement
end product of operating budgets; indicates expected profitability of operations
manufacturing overhead budget
shows the expected manufacturing overhead costs
distinguish between fixed and variable costs
selling administrative expense budget
a projection of anticipated operating expenses
distinguish between fixed and variable costs
order in which the budgets are prepared
- Sales budget.
- Production budget.
- Direct labor budget.
- Direct materials budget.
- Manufacturing 6.overhead budget.
- Selling and administrative expense budget.
cash budget
contains:
- cash receipts
- cash disbursements
- financing
merchandisers sales budget
these use a purchase budget instead of a production budget.
-does not use the manufacturing budgets (DM,DL,MO)
required merchandise purchases formula
budgeted cost of goods sold + desired ending merchandise inventory-beginning merchandise inventory
