Garrison Lecture Chapter 8

7/24/2019 Garrison Lecture Chapter 8

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PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMAJon A. Booker, Ph.D.,CPA, CIA

Cnthia J. !oone, Ph.D., CPACopyright 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Master Bud"etin"Cha#ter $


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%earnin" &b'e(ti)e *

Understand why

organizations budgetand the processes they

use to create budgets.


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8-3

+he Basi( ramework o- Bud"etin"

A budgetis a detailed uantitati)e #lan -ora(uirin" and usin" -inan(ial and other resour(eso)er a s#e(i-ied -orth(omin" time #eriod.

*. +he a(t o- #re#arin" a bud"et is (alledbudgeting.

/. +he use o- bud"ets to (ontrol an

or"ani0ation1s a(ti)ities is knownas budgetary control.


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8-4

Di--eren(e Between Plannin" andControl

PlanningPlanning22in)ol)es de)elo#in"in)ol)es de)elo#in"

ob'e(ti)es andob'e(ti)es and

#re#arin" )arious#re#arin" )ariousbud"ets to a(hie)ebud"ets to a(hie)e

those ob'e(ti)es.those ob'e(ti)es.

PlanningPlanning22in)ol)es de)elo#in"in)ol)es de)elo#in"

ob'e(ti)es andob'e(ti)es and

#re#arin" )arious#re#arin" )ariousbud"ets to a(hie)ebud"ets to a(hie)e

those ob'e(ti)es.those ob'e(ti)es.

ControlControl22in)ol)es the ste#s takenin)ol)es the ste#s taken

b mana"ement tob mana"ement to

in(rease the likelihood thatin(rease the likelihood thatthe ob'e(ti)es set downthe ob'e(ti)es set down

while #lannin" are attainedwhile #lannin" are attained

and that all #arts o- theand that all #arts o- the

or"ani0ation are workin"or"ani0ation are workin"to"ether toward that "oal.to"ether toward that "oal.

ControlControl22in)ol)es the ste#s takenin)ol)es the ste#s taken

b mana"ement tob mana"ement to

in(rease the likelihood thatin(rease the likelihood thatthe ob'e(ti)es set downthe ob'e(ti)es set down

while #lannin" are attainedwhile #lannin" are attained

and that all #arts o- theand that all #arts o- the

or"ani0ation are workin"or"ani0ation are workin"to"ether toward that "oal.to"ether toward that "oal.


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8-5

Ad)anta"es o- Bud"etin"

Advantages

De-ine "oalsDe-ine "oalsand ob'e(ti)esand ob'e(ti)es

3n(o)er #otential3n(o)er #otential

bottlene(ksbottlene(ks

CoordinateCoordinate

a(ti)itiesa(ti)ities

Communi(ate#lans

Means o- allo(atin"Means o- allo(atin"

resour(esresour(es


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ResponsibilityA((ountin"

Mana"ers should be heldMana"ers should be heldres#onsible -or those items 4res#onsible -or those items 4

andand onlyonlythose items 4 thatthose items 4 thatthe (an a(tuall (ontrolthe (an a(tuall (ontrolto a si"ni-i(ant e5tent.to a si"ni-i(ant e5tent.!es#onsibilit a((ountin"!es#onsibilit a((ountin"

enables or"ani0ations toenables or"ani0ations to reactreactquicklyquicklyto de)iations -rom theirto de)iations -rom their#lans and to#lans and to learnlearn-rom-rom-eedba(k.-eedba(k.


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8-7

Choosin" the Bud"et Period

Operating BudgetOperating Budget

2014 2015 201 201!

eratin" bud"ets ordinarileratin" bud"ets ordinaril

(o)er a one4ear #eriod(o)er a one4ear #eriod

(orres#ondin" to a (om#an1s(orres#ondin" to a (om#an1s-is(al ear. Man (om#anies-is(al ear. Man (om#aniesdi)ide their annual bud"etdi)ide their annual bud"et

into -our uarters.into -our uarters.

A (ontinuous bud"et is aA (ontinuous bud"et is a*/4month bud"et that rolls*/4month bud"et that rolls

-orward one month 6or uarter7-orward one month 6or uarter7as the (urrent month 6or uarter7as the (urrent month 6or uarter7

is (om#leted.is (om#leted.


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Sel-4Im#osed Bud"et

A sel-4im#osed bud"et or #arti(i#ati)e bud"et is a bud"et that is#re#ared with the -ull (oo#eration and #arti(i#ation o- mana"ers

at all le)els.

S u # e r ) i s o r S u # e r ) i s o r

M i d d l eM a n a " e m e n t

S u # e r ) i s o r S u # e r ) i s o r

M i d d l eM a n a " e m e n t

+ o # M a n a " e m e n t


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Ad)anta"es o- Sel-4Im#osed Bud"ets

*. Indi)iduals at all le)els o- the or"ani0ation are )iewed asmembers o- the team whose 'ud"ments are )alued b to#mana"ement.

/. Bud"et estimates #re#ared b -ront4line mana"ers are

o-ten more a((urate than estimates #re#ared b to#mana"ers.

8. Moti)ation is "enerall hi"her when indi)iduals #arti(i#atein settin" their own "oals than when the "oals areim#osed -rom abo)e.

9. A mana"er who is not able to meet a bud"et im#osed-rom abo)e (an (laim that it was unrealisti(. Sel-4im#osed

bud"ets eliminate this e5(use.

*. Indi)iduals at all le)els o- the or"ani0ation are )iewed asmembers o- the team whose 'ud"ments are )alued b to#mana"ement.

/. Bud"et estimates #re#ared b -ront4line mana"ers are

o-ten more a((urate than estimates #re#ared b to#mana"ers.

8. Moti)ation is "enerall hi"her when indi)iduals #arti(i#atein settin" their own "oals than when the "oals areim#osed -rom abo)e.

9. A mana"er who is not able to meet a bud"et im#osed-rom abo)e (an (laim that it was unrealisti(. Sel-4im#osed

bud"ets eliminate this e5(use.


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Sel-4Im#osed Bud"ets

Sel-4im#osed bud"ets should be re)iewedb hi"her le)els o- mana"ement to

#re)ent bud"etar sla(k.;

Most (om#anies issue broad "uidelines interms o- o)erall #ro-its or sales. %owerle)el mana"ers are dire(ted to #re#are

bud"ets that meet those tar"ets.

Sel-4im#osed bud"ets should be re)iewedb hi"her le)els o- mana"ement to

#re)ent bud"etar sla(k.;

Most (om#anies issue broad "uidelines interms o- o)erall #ro-its or sales. %owerle)el mana"ers are dire(ted to #re#are

bud"ets that meet those tar"ets.


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+he Master Bud"et: An &)er)iew

Produ(tion bud"et

Sellin" andadministrati)e

bud"et

Dire(t materialsbud"et

Manu-a(turin"o)erhead bud"et

Dire(t laborbud"et

Cash Bud"et

Sales bud"et

=ndin" in)entorbud"et

Bud"etedbalan(e sheet

Bud"etedin(ome

statement


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Seein" the Bi" Pi(ture

+o hel# ou see the bi" #i(ture; kee# in mindthat the *> s(hedules in the master bud"et aredesi"ned to answer the *> uestions shown on

the ne5t s(reen.

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Seein" the Bi" Pi(ture

*.


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A master bud"et is based on )arious estimatesA master bud"et is based on )arious estimates

and assum#tions. or e5am#le, the salesand assum#tions. or e5am#le, the sales

bud"et reuires threebud"et reuires three estimatesassum#tionsestimatesassum#tionsas -ollows:as -ollows:*.*.What are the bud"eted unit sales?What are the bud"eted unit sales?

/./.What is the bud"eted sellin" #ri(e #er unit?What is the bud"eted sellin" #ri(e #er unit?

8.8.What #er(enta"e o- a((ounts re(ei)able willWhat #er(enta"e o- a((ounts re(ei)able willbe (olle(ted in the (urrent and subseuentbe (olle(ted in the (urrent and subseuent#eriods.#eriods.

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When Mi(roso-t =5(elEis used to (reate amaster bud"et, these t#es o- assum#tions(an be de#i(ted in a Bud"et Assum#tions

tab, thereb enablin" =5(el4based bud"et toanswer what4i-; uestions.

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%earnin" &b'e(ti)e /

"repare a sales budget#

including a schedule o$e%pected cash

collections.

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Bud"etin" =5am#le

!oal Com#an is #re#arin" bud"ets -or theuarter endin" June 8>th.

Bud"eted sales -or the ne5t -i)e months are:

April 20#000 units &ay 50#000 units

'une (0#000 units

'uly 25#000 units

August 15#000 units+he sellin" #ri(e is F*> #er unit.

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+he Sales Bud"et

+he indi)idual months o- A#ril, Ma, and June aresummed to obtain the total bud"eted sales in units

and dollars -or the uarter ended June 8>th

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=5#e(ted Cash Colle(tions

All sales are on a((ount.

!oal1s (olle(tion #attern is: > (olle(ted in the month o- sale,

/@ (olle(ted in the month -ollowin" sale, @ un(olle(tible.

In A#ril, the Mar(h 8*sta((ounts re(ei)able

balan(e o- F8>,>>> will be (olle(ted in -ull.

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rom the Sales Bud"et -or A#ril.rom the Sales Bud"et -or A#ril.

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rom the Sales Bud"et -or Ma.rom the Sales Bud"et -or Ma.

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Hui(k Che(k

What will be the total (ash (olle(tions -orthe uarter?

a. F>>,>>>b. F//>,>>>

(. F*>,>>>

d. F>@,>>>

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What will be the total (ash (olle(tions -orthe uarter?

a. F>>,>>>b. F//>,>>>

(. F*>,>>>

d. F>@,>>>

Hui(k Che(k

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%earnin" &b'e(ti)e 8

"repare a production

budget.

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+he Produ(tion Bud"et

"roduction"roduction

BudgetBudget

)ales)ales

BudgetBudget

andand

*%pected*%pected

+ash+ash

+ollections+ollections

+o,ple

ted

+he #rodu(tion bud"et must be adeuate to+he #rodu(tion bud"et must be adeuate to

meet bud"eted sales and to #ro)ide -ormeet bud"eted sales and to #ro)ide -orthe desired endin" in)entor.the desired endin" in)entor.

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+he mana"ement at !oal Com#an wants+he mana"ement at !oal Com#an wantsendin" in)entor to be eual toendin" in)entor to be eual to 20%20%o- theo- the-ollowin" month1s bud"eted sales in units.-ollowin" month1s bud"eted sales in units.

&n Mar(h 8*&n Mar(h 8*stst, 9,>>> units were on hand., 9,>>> units were on hand.

%et1s #re#are the #rodu(tion bud"et.%et1s #re#are the #rodu(tion bud"et.

I- !oal was a mer(handisin" (om#an it would #re#are amer(handise #ur(hase bud"et instead o- a #rodu(tion bud"et.

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Mar(h 8*Mar(h 8*endin" in)entor.endin" in)entor.

Mar(h 8*Mar(h 8*

endin" in)entor.endin" in)entor.

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Hui(k Che(k

What is the reuired #rodu(tion -or Ma?

a. @,>>> units

b. 9,>>> units

(. /,>>> units

d. @/,>>> units


a. @,>>> units

b. 9,>>> units

(. /,>>> units

d. @/,>>> units

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a. @,>>> units

b. 9,>>> units

(. /,>>> units

d. @/,>>> units


a. @,>>> units

b. 9,>>> units

(. /,>>> units

d. @/,>>> units

Hui(k Che(k

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Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.

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%earnin" &b'e(ti)e 9

"repare a direct

,aterials budget#

including a schedule o$e%pected cash

disburse,ents $or

purchases o$ ,aterials.

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+he Dire(t Materials Bud"et

At !oal Com#an,At !oal Com#an, five poundsfive poundso- materialo- materialare reuired #er unit o- #rodu(t.are reuired #er unit o- #rodu(t.

Mana"ement wants materials on hand at theMana"ement wants materials on hand at the

end o- ea(h month eual toend o- ea(h month eual to 10%10%o- theo- the-ollowin" month1s #rodu(tion.-ollowin" month1s #rodu(tion.

&n Mar(h 8*, *8,>>> #ounds o- material are&n Mar(h 8*, *8,>>> #ounds o- material are

on hand. Material (ost ison hand. Material (ost is $0.40$0.40#er #ound.#er #ound.

%et1s #re#are the dire(t materials bud"et.%et1s #re#are the dire(t materials bud"et.

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rom #rodu(tion bud"et.rom #rodu(tion bud"et.

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Cal(ulate the materials toCal(ulate the materials tobe #ur(hased in Ma.be #ur(hased in Ma.

Mar(h 8* in)entor.Mar(h 8* in)entor.Mar(h 8* in)entor.Mar(h 8* in)entor.

*> o- -ollowin" month1s#rodu(tion needs.

*> o- -ollowin" month1s#rodu(tion needs.

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Hui(k Che(k

> #ounds

b. /9>,>>> #ounds

(. /8>,>>> #ounds

d. /**,@>> #ounds

> #ounds

b. /9>,>>> #ounds

(. /8>,>>> #ounds

d. /**,@>> #ounds

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> #ounds

b. /9>,>>> #ounds

(. /8>,>>> #ounds

d. /**,@>> #ounds

> #ounds

b. /9>,>>> #ounds

(. /8>,>>> #ounds

d. /**,@>> #ounds

Hui(k Che(k

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Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.

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=5#e(ted Cash Disbursement -orMaterials

!oal #as!oal #as $0.40$0.40per poundper pound-or its materials.-or its materials.

ne!"alfne!"alf o- a month1s #ur(hases is #aid -or ino- a month1s #ur(hases is #aid -or in

the month o- #ur(hase the other hal- is #aid inthe month o- #ur(hase the other hal- is #aid inthe -ollowin" month.the -ollowin" month.

+he Mar(h 8* a((ounts #aable balan(e is+he Mar(h 8* a((ounts #aable balan(e is

F*/,>>>.F*/,>>>.

%et1s (al(ulate e5#e(ted (ash disbursements.%et1s (al(ulate e5#e(ted (ash disbursements.

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*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>

Com#ute the e5#e(ted (ashCom#ute the e5#e(ted (ashdisbursements -or materialsdisbursements -or materials

-or the uarter.-or the uarter.

Com#ute the e5#e(ted (ashCom#ute the e5#e(ted (ashdisbursements -or materialsdisbursements -or materials-or the uarter.-or the uarter.

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Hui(k Che(k

What are the total (ash disbursements -orWhat are the total (ash disbursements -or

the uarter?the uarter?

a. F*$@,>>>a. F*$@,>>>

b. F $,>>>b. F $,>>>

(. F @,>>>(. F @,>>>

d. F/>*,9>>d. F/>*,9>>



a. F*$@,>>>a. F*$@,>>>

b. F $,>>>b. F $,>>>

(. F @,>>>(. F @,>>>

d. F/>*,9>>d. F/>*,9>>

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a. F*$@,>>>a. F*$@,>>>

b. F $,>>>b. F $,>>>

(. F @,>>>(. F @,>>>

d. F/>*,9>>d. F/>*,9>>



a. F*$@,>>>a. F*$@,>>>

b. F $,>>>b. F $,>>>

(. F @,>>>(. F @,>>>

d. F/>*,9>>d. F/>*,9>>

Hui(k Che(k

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%earnin" &b'e(ti)e @

"repare a direct labor

budget.

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+he Dire(t %abor Bud"et

At !oal, ea(h unit o- #rodu(t reuires 0.0# hours 68minutes7 o- dire(t labor.

+he Com#an has a no lao--; #oli( so all em#loees willbe #aid -or 9> hours o- work ea(h week.

or #ur#oses o- our illustration assume that !oal has a nolao--; #oli(, workers are #aid at the rate o- F*> #er hourre"ardless o- the hours worked.

or the ne5t three months, the dire(t labor work-or(e will be#aid -or a minimum o- *,@>> hours #er month.

-ets prepare the direct labor budget.-ets prepare the direct labor budget.

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rom #rodu(tion bud"et.rom #rodu(tion bud"et.rom #rodu(tion bud"et.rom #rodu(tion bud"et.

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Greater o- labor hours reuiredGreater o- labor hours reuiredor labor hours "uaranteed.or labor hours "uaranteed.

Greater o- labor hours reuiredGreater o- labor hours reuiredor labor hours "uaranteed.or labor hours "uaranteed.

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Hui(k Che(k

What would be the total dire(t labor (ost -orthe uarter i- the (om#an -ollows its no la4o-- #oli(, but #as F*@ 6time4and4a4hal-7 -or

e)er hour worked in e5(ess o- *,@>> hoursin a month?

a. F,@>>

b. F9,@>>

(. F*,>>>d. F@,>>>

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What would be the total dire(t labor (ost -orthe uarter i- the (om#an -ollows its no la4o-- #oli(, but #as F*@ 6time4and4a4hal-7 -ore)er hour worked in e5(ess o- *,@>> hoursin a month?

a. F,@>>

b. F9,@>>

(. F*,>>>d. F@,>>>

Hui(k Che(k

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%earnin" &b'e(ti)e

"repare a ,anu$acturing

overhead budget.

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Manu-a(turin" &)erhead Bud"et

At !oal, manu-a(turin" o)erhead is a##lied toAt !oal, manu-a(turin" o)erhead is a##lied tounits o- #rodu(t on the basis o- dire(t labor hours.units o- #rodu(t on the basis o- dire(t labor hours.

+he+he )ariable)ariablemanu-a(turin" o)erhead rate ismanu-a(turin" o)erhead rate is F/>F/>

#er dire(t labor hour#er dire(t labor hour.. i5ed manu-a(turin" o)erhead isi5ed manu-a(turin" o)erhead is F@>,>>>F@>,>>> #er#er

month, whi(h in(ludesmonth, whi(h in(ludes F/>,>>> o- non(ash (ostsF/>,>>> o- non(ash (osts6#rimaril de#re(iation o- #lant assets7.6#rimaril de#re(iation o- #lant assets7.

%et1s #re#are the manu-a(turin" o)erhead bud"et.%et1s #re#are the manu-a(turin" o)erhead bud"et.

At !oal, manu-a(turin" o)erhead is a##lied toAt !oal, manu-a(turin" o)erhead is a##lied tounits o- #rodu(t on the basis o- dire(t labor hours.units o- #rodu(t on the basis o- dire(t labor hours.

+he+he )ariable)ariablemanu-a(turin" o)erhead rate ismanu-a(turin" o)erhead rate is F/>F/>

#er dire(t labor hour#er dire(t labor hour.. i5ed manu-a(turin" o)erhead isi5ed manu-a(turin" o)erhead is F@>,>>>F@>,>>> #er#er

month, whi(h in(ludesmonth, whi(h in(ludes F/>,>>> o- non(ash (ostsF/>,>>> o- non(ash (osts6#rimaril de#re(iation o- #lant assets7.6#rimaril de#re(iation o- #lant assets7.

%et1s #re#are the manu-a(turin" o)erhead bud"et.%et1s #re#are the manu-a(turin" o)erhead bud"et.

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Dire(t %abor Bud"et.Dire(t %abor Bud"et.

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+otal m-". &< -or uarter F/@*,>>>+otal labor hours reuired @,>@> K F9.> #er hour L

/ rounded/ rounded

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De#re(iation is a non(ash (har"e.De#re(iation is a non(ash (har"e.De#re(iation is a non(ash (har"e.De#re(iation is a non(ash (har"e.

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=ndin" inished Goods In)entorBud"et

Dire(t materialsDire(t materialsbud"et and in-ormation.bud"et and in-ormation.

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Dire(t labor bud"et.Dire(t labor bud"et.

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+otal m-". &< -or uarter F/@*,>>>+otal labor hours reuired @,>@>

K F9.> #er hour

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Produ(tion Bud"et.Produ(tion Bud"et.

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%earnin" &b'e(ti)e

"repare a selling and

ad,inistrative e%pensebudget.

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Sellin" and Administrati)e =5#enseBud"et

At !oal, the sellin" and administrati)e e5#ense bud"et isAt !oal, the sellin" and administrati)e e5#ense bud"et isdi)ided into )ariable and -i5ed (om#onents.di)ided into )ariable and -i5ed (om#onents.

+he+he )ariable)ariablesellin" and administrati)e e5#enses are F>.@>sellin" and administrati)e e5#enses are F>.@>

#er unit sold.#er unit sold. i5edi5edsellin" and administrati)e e5#enses are F>,>>> #ersellin" and administrati)e e5#enses are F>,>>> #er

month.month.

+he -i5ed sellin" and administrati)e e5#enses in(lude+he -i5ed sellin" and administrati)e e5#enses in(lude

F*>,>>> in (osts 2 #rimaril de#re(iation 2 that are not (ashF*>,>>> in (osts 2 #rimaril de#re(iation 2 that are not (ashout-lows o- the (urrent month.out-lows o- the (urrent month.

%et1s #re#are the (om#an1s sellin" and administrati)e%et1s #re#are the (om#an1s sellin" and administrati)e

e5#ense bud"et.e5#ense bud"et.

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Sellin" and Administrati)e =5#enseBud"et

Cal(ulate the sellin" and administrati)eCal(ulate the sellin" and administrati)e

(ash e5#enses -or the uarter.(ash e5#enses -or the uarter.

Cal(ulate the sellin" and administrati)eCal(ulate the sellin" and administrati)e

(ash e5#enses -or the uarter.(ash e5#enses -or the uarter.

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Hui(k Che(k

What are the total (ash disbursements -orsellin" and administrati)e e5#enses -or theuarter?

a. F*$>,>>>b. F/8>,>>>

(. F**>,>>>

d. F >,>>>


a. F*$>,>>>b. F/8>,>>>

(. F**>,>>>

d. F >,>>>

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a. F*$>,>>>b. F/8>,>>>

(. F**>,>>>

d. F >,>>>


a. F*$>,>>>b. F/8>,>>>

(. F**>,>>>

d. F >,>>>

Hui(k Che(k

8-73


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Sellin" Administrati)e =5#ense Bud"et

8-74


74/92

%earnin" &b'e(ti)e $

"repare a cash budget.

8-75


75/92

ormat o- the Cash Bud"et

+he (ash bud"et is di)ided into -our se(tions:+he (ash bud"et is di)ided into -our se(tions:

*.*. Cash re(ei#tsCash re(ei#ts se(tion lists all (ash in-lows e5(ludin" (ashse(tion lists all (ash in-lows e5(ludin" (ash

re(ei)ed -rom -inan(in"re(ei)ed -rom -inan(in"

/./. Cash disbursementsCash disbursementsse(tion (onsists o- all (ash #amentsse(tion (onsists o- all (ash #amentse5(ludin" re#aments o- #rin(i#al and intereste5(ludin" re#aments o- #rin(i#al and interest

8.8. Cash e5(ess or de-i(ien( se(tion determines i- theCash e5(ess or de-i(ien( se(tion determines i- the(om#an will(om#an will need to borrow moneneed to borrow mone or i- it will be able toor i- it will be able to

re#a -unds #re)iousl borrowed andre#a -unds #re)iousl borrowed and

9.9. inan(in" se(tioninan(in" se(tiondetails the borrowin"s and re#amentsdetails the borrowin"s and re#aments

#ro'e(ted to take #la(e durin" the bud"et #eriod.#ro'e(ted to take #la(e durin" the bud"et #eriod.

+he (ash bud"et is di)ided into -our se(tions:+he (ash bud"et is di)ided into -our se(tions:

*.*. Cash re(ei#tsCash re(ei#ts se(tion lists all (ash in-lows e5(ludin" (ashse(tion lists all (ash in-lows e5(ludin" (ash

re(ei)ed -rom -inan(in"re(ei)ed -rom -inan(in"

/./. Cash disbursementsCash disbursementsse(tion (onsists o- all (ash #amentsse(tion (onsists o- all (ash #amentse5(ludin" re#aments o- #rin(i#al and intereste5(ludin" re#aments o- #rin(i#al and interest

8.8. Cash e5(ess or de-i(ien( se(tion determines i- theCash e5(ess or de-i(ien( se(tion determines i- the

(om#an will(om#an will need to borrow moneneed to borrow mone or i- it will be able toor i- it will be able to

re#a -unds #re)iousl borrowed andre#a -unds #re)iousl borrowed and

9.9. inan(in" se(tioninan(in" se(tiondetails the borrowin"s and re#amentsdetails the borrowin"s and re#aments

#ro'e(ted to take #la(e durin" the bud"et #eriod.#ro'e(ted to take #la(e durin" the bud"et #eriod.

8-76


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+he Cash Bud"et

Assume the -ollowin" in-ormation -or !oal:Assume the -ollowin" in-ormation -or !oal:Maintains a * o#en line o- (redit -or F@,>>>.Maintains a * o#en line o- (redit -or F@,>>>.

Maintains a minimum (ash balan(e o- F8>,>>>.Maintains a minimum (ash balan(e o- F8>,>>>.

Borrows on the -irst da o- the month and re#asBorrows on the -irst da o- the month and re#asloans on the last da o- the month.loans on the last da o- the month.

Pas a (ash di)idend o- F9,>>> in A#ril.Pas a (ash di)idend o- F9,>>> in A#ril.

Pur(hases F*98,>> o- eui#ment in Ma andPur(hases F*98,>> o- eui#ment in Ma andF9$,8>> in June 6both #ur(hases #aid in (ash7.F9$,8>> in June 6both #ur(hases #aid in (ash7.

,>>>.,>>>.

8-77


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+he Cash Bud"et

S(hedule o- =5#e(tedS(hedule o- =5#e(ted

Cash Colle(tions.Cash Colle(tions.


Cash Colle(tions.Cash Colle(tions.

8-78


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+he Cash Bud"et

Dire(t %aborDire(t %aborBud"et.Bud"et.

Manu-a(turin"Manu-a(turin"&)erhead Bud"et.&)erhead Bud"et.

Sellin" and Administrati)eSellin" and Administrati)e=5#ense Bud"et.=5#ense Bud"et.


Cash Disbursements.Cash Disbursements.

8-79

+h C h B d t


79/92

+he Cash Bud"et

Be(ause !oal maintainsBe(ause !oal maintainsa (ash balan(e o- F8>,>>>,a (ash balan(e o- F8>,>>>,the (om#an must borrowthe (om#an must borrow

F@>,>>> on its line4o-4(redit.F@>,>>> on its line4o-4(redit.

8-80

+h C h B d t


80/92

+he Cash Bud"et

=ndin" (ash balan(e -or A#ril=ndin" (ash balan(e -or A#rilis the be"innin" Ma balan(e.is the be"innin" Ma balan(e.

Be(ause !oal maintainsBe(ause !oal maintainsa (ash balan(e o- F8>,>>>,a (ash balan(e o- F8>,>>>,

the (om#an must borrowthe (om#an must borrowF@>,>>> on its line4o-4(redit.F@>,>>> on its line4o-4(redit.

8-81

+h C h B d t


81/92

+he Cash Bud"et

8-82


82/92

Hui(k Che(k

What is the e5(ess 6de-i(ien(7 o- (asha)ailable o)er disbursements -or June?

a. F $@,>>>

b. F6*>,>>>7(. F @,>>>

d. F @,>>>

8-83


83/92

What is the e5(ess 6de-i(ien(7 o- (asha)ailable o)er disbursements -or June?

a. F $@,>>>

b. F6*>,>>>7(. F @,>>>

d. F @,>>>

Hui(k Che(k

8-84

+he Cash Bud"et


84/92

+he Cash Bud"et

F@>,>>> * 8*/ K F/,>>>F@>,>>> * 8*/ K F/,>>>Borrowin"s on A#ril * andBorrowin"s on A#ril * and

re#ament on June 8>.re#ament on June 8>.

8-85


85/92

+he Bud"eted In(ome Statement

+ash

BudgetBudgeted

nco,e

)tate,ent

+o,pleted

ith interest e%pense $ro, the cashbudget# oyal can prepare the budgeted

inco,e state,ent.

8-86


86/92

%earnin" &b'e(ti)e

"repare a budgeted

inco,e state,ent.

8-87


87/92

+he Bud"eted In(ome Statement

Sales Bud"et.Sales Bud"et.

=ndin" inished=ndin" inishedGoods In)entor.Goods In)entor.

Sellin" andSellin" andAdministrati)eAdministrati)e

=5#ense Bud"et.=5#ense Bud"et.

Cash Bud"et.Cash Bud"et.

8-88


88/92

%earnin" &b'e(ti)e *>

"repare a budgeted

balance sheet.

8-89


89/92

+he Bud"eted Balan(e Sheet

!oal re#orted the -ollowin" a((ount!oal re#orted the -ollowin" a((ountbalan(es #rior to #re#arin" its bud"etedbalan(es #rior to #re#arin" its bud"eted

-inan(ial statements:-inan(ial statements:

%and 4 F@>,>>>%and 4 F@>,>>> Common sto(k 4 F/>>,>>>Common sto(k 4 F/>>,>>> !etained earnin"s 4 F*9,*@> 6A#ril *7!etained earnin"s 4 F*9,*@> 6A#ril *7

=ui#ment 4 F*@,>>>=ui#ment 4 F*@,>>>

8-90


90/92

8-91


91/92

Beginning balance 14#1503Add net inco,e 2(#000

6educt dividends 74#0008

*nding balance ((#1503

8-92


92/92

=nd o- Cha#ter $

Documents

Garrison Lecture Chapter 8