Budget Preparation
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Transcript of Budget Preparation
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ProductionBudget
ProductionBudget
Selling andAdministrative
Budget
DirectMaterialsBudget
DirectMaterialsBudget
DirectLabor
Budget
DirectLabor
Budget
CashBudgetCash
Budget
SalesBudgetSales
BudgetEnding
Finished GoodsBudget
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The individual months of April, May, and June are summed to obtain the total projected sales in units
and dollars for the quarter ended June 30th
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Budgeted May sales 50,000
Desired ending inventory % 20%Desired ending inventory 10,000
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March 31 inventoryMarch 31 inventory
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Greater of labor hours requiredor labor hours guaranteed.
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Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor Manufacturing overhead
Budgeted finished goods inventory Ending inventory in units Unit product cost Ending finished goods inventory
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Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead
Budgeted finished goods inventory Ending inventory in units Unit product cost Ending finished goods inventory
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Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead 0.05 hrs. 49.70$ 2.49
4.99$
Budgeted finished goods inventory Ending inventory in units Unit product cost 4.99$ Ending finished goods inventory
Total mfg. OH for quarter $251,000Total labor hours required 5,050
= $49.70 per hour*
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Production costs per unit Quantity Cost Total Direct materials 5.00 lbs. 0.40$ 2.00$ Direct labor 0.05 hrs. 10.00$ 0.50 Manufacturing overhead 0.05 hrs. 49.70$ 2.49
4.99$
Budgeted finished goods inventory Ending inventory in units 5,000 Unit product cost 4.99$ Ending finished goods inventory 24,950$
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The cash budget is divided into four sections:
1. Cash receipts listing all cash inflows excluding borrowing;
2. Cash disbursements listing all payments excluding repayments of principal and interest;
3. Cash excess or deficiency; and
4. The financing section listing all borrowings, repayments and interest.
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Schedule of ExpectedSchedule of ExpectedCash CollectionsCash Collections
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Direct LaborDirect LaborBudgetBudget
ManufacturingManufacturingOverhead BudgetOverhead Budget
Selling and AdministrativeSelling and AdministrativeExpense BudgetExpense Budget
Schedule of ExpectedSchedule of ExpectedCash DisbursementsCash Disbursements
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In the month of April will expect to have a cash deficiency of $20,000.
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Royal CompanyBudgeted Income Statement
For the Three Months Ended June 30
Sales (100,000 units @ $10) 1,000,000$ Cost of goods sold (100,000 @ $4.99) 499,000 Gross margin 501,000 Selling and administrative expenses 260,000 Operating income 241,000 Interest expense 2,000 Net income 239,000$
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Royal CompanyBudgeted Balance Sheet
June 30
Current assets Cash 43,000$ Accounts receivable 75,000 Raw materials inventory 4,600 Finished goods inventory 24,950 Total current assets 147,550 Property and equipment Land 50,000 Equipment 367,000 Total property and equipment 417,000 Total assets 564,550$
Accounts payable 28,400$ Common stock 200,000 Retained earnings 336,150 Total liabilities and equities 564,550$
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Royal CompanyBudgeted Balance Sheet
June 30
Current assets Cash 43,000$ Accounts receivable 75,000 Raw materials inventory 4,600 Finished goods inventory 24,950 Total current assets 147,550 Property and equipment Land 50,000 Equipment 367,000 Total property and equipment 417,000 Total assets 564,550$
Accounts payable 28,400$ Common stock 200,000 Retained earnings 336,150 Total liabilities and equities 564,550$
Beginning balance 146,150$ Add: net income 239,000 Deduct: dividends (49,000) Ending balance 336,150$
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