CAPP Manual - 20505 - Accounts Receivable, Accounts Receivable
Cash, Short-term Investments and Accounts Receivable
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Chapter 4 1 Cash, Short-term Investments and Accounts Receivable Chapter 4
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Cash, Short-term Investments and Accounts Receivable. Chapter 4. Chapter 13. The Master Budget. Learning Objectives Chapter 13. Assess the importance of budgeting. Prepare a master budget. Discuss the uses of a rolling budget. - PowerPoint PPT Presentation
Transcript of Cash, Short-term Investments and Accounts Receivable
Chapter 4 1
Cash, Short-term Investments
and Accounts Receivable
Chapter 4
Chapter 13The Master Budget
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Learning ObjectivesChapter 13
•Assess the importance of budgeting.
•Prepare a master budget.
•Discuss the uses of a rolling budget.
•Explain how standard costs are used in preparing budgets and assessing responsibility.
•Calculate material and labor variances for purposes of control and performance evaluation.
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The process of budgeting is the interpretation of future plans into monetary amounts so that progress toward organizational goals can be determined.
A budget is a financial plan for the future .
Budgeting
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Top Down
Participatory
Ways of Budgeting
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Master BudgetMaster Budget
Operating BudgetsSales Budget
Production BudgetPurchases Budget
Direct Labor BudgetOverhead BudgetCapital Budget
Cash BudgetCash Collections from SalesCash Payments for Purchases
Budgeted Financial StatementsCost of Goods Manufactured
Income Statement Balance Sheet
Statement of Cash Flows
Flow of Budgeted Information through the Master Budget
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Fast-Food Funthings Projected Balance Sheet December 31, 2009
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In order to prepare the master budget for the first quarter of 2010, we need the December 31, 2009 balance sheet.
Sales Budget
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The sales budget is prepared in both units and dollars.
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a. $5,600,000
b. $5,100,000
c. $6,200,000
d. $4,300,000
Best Company sells a product for $60. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Best will budget total sales for 2010 at:
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a. $5,600,000
b. $5,100,000
c. $6,200,000
d. $4,300,000
Best Company sells a product for $60. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Best will budget total sales for 2010 at:
Production Budget
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The production budget is used to calculate how many items need to be manufactured in a particular period.
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a. 85,000 units.
b. 92,000 units.
c. 78,000 units.
d. 57,000 units.
Best Company sells a product for $20. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Budget production for 2010 amounts to:
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a. 85,000 units.
b. 92,000 units.
c. 78,000 units.
d. 57,000 units.
Best Company sells a product for $20. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Budget production for 2010 amounts to:
Purchases Budget
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The purchases budget is prepared to determine quantities of raw material to buy to complete the budgeted production, given the quantities of material in the beginning and ending Direct Material Inventory.
Direct Labor Budget
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Given expected production, direct labor requirements are calculated on the direct labor budget.
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a. $2,340,000.
b. $2,550,000.
c. $2,760,000.
d. $1,710,000.
Best Company sells a product for $20. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Assuming each unit requires 1.5 hours of direct labor and labor costs $20 per hour, the total direct labor budget for 2010 amounts to:
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a. $2,340,000.
b. $2,550,000.
c. $2,760,000.
d. $1,710,000.
Best Company sells a product for $20. Best reports finished goods on hand on January 1, 2010, of 32,000 units and desires a Dec. 31, 2010 inventory of 25,000. Best plans to sell 85,000 units during 2010. Assuming each unit requires 1.5 hours of direct labor and labor costs $20 per hour, the total direct labor budget for 2010 amounts to:
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The overhead budget is used to compute overhead costs for budgeted production levels.Fast-Food Funthings has chosen to combine its production overhead budget and its selling and adm. budget into a single overhead budget.
Overhead Budget
Capital Budget
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If the company plans to make any purchases of plant assets during the master budget period, those amounts are included in a capital budget.
Information for the Cash Budget
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After all the preceding budgets have been developed, a cash budget can be constructed.
However, the sales and purchases budgets must first be converted to a cash basis before the cash budget can be prepared.
We need to prepare two schedules:
•Schedule of Cash Collections from Sales•Schedule of Cash Payments for Purchases
These schedules are shown on the following slides.
Schedule of Cash Collections from Sales
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a. $60,000.
b. $40,000.
c. $127,500.
d. $85,000.
Best Company began operations on January 1, 2010. Best anticipates credit sales to be collected as follows: 50% in the month of sale, 30% in month after sale, and 20% in the following month. Credit sales are as follows: January, $200,000; February, $225,000; and March, $285,000. The cash collected in March from January credit sales amounts to:
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a. $60,000.
b. $40,000.
c. $127,500.
d. $85,000.
Best Company began operations on January 1, 2010. Best anticipates credit sales to be collected as follows: 50% in the month of sale, 30% in month after sale, and 20% in the following month. Credit sales are as follows: January, $200,000; February, $225,000; and March, $285,000. The cash collected in March from January credit sales amounts to:
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a. $212,500.
b. $152,500.
c. $167,500.
d. $172,500.
Best Company began operations on January 1, 2010. Best anticipates credit sales to be collected as follows: 50% in the month of sale, 30% in month after sale, and 20% in the following month. Credit sales are as follows: January, $200,000; February, $225,000; and March, $285,000. The total cash collected in February from credit sales amounts to:
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a. $212,500.
b. $152,500.
c. $167,500.
d. $172,500.
Best Company began operations on January 1, 2010. Best anticipates credit sales to be collected as follows: 50% in the month of sale, 30% in month after sale, and 20% in the following month. Credit sales are as follows: January, $200,000; February, $225,000; and March, $285,000. The total cash collected in February from credit sales amounts to:
Schedule of Cash Payments for Purchases
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Cash Budget
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Budgeted Financial Statements
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The last component of the master budget is the preparation of pro forma financial statements for the period.
Fast-Food Funthings prepares the following budgeted financial statements:
•Pro Forma Cost of Goods Manufactured Schedule•Pro Forma Income Statement•Pro Forma Balance Sheet•Pro Forma Statement of Cash Flows
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Pro Forma Cost of Goods Manufactured Schedule
Pro Forma Income Statement
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Pro Forma Balance Sheet
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Pro Forma Statement of Cash Flows
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Variance AnalysisA standard is simply a norm or average.
A standard cost is the budgeted cost to make one unit of product (or perform one unit of service).
Variance analysis is the process of determining the standard-to-actual differences and assessing whether that difference is favorable or unfavorable.
Material Variances
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Material variances indicate how close actual material usage and cost were to standard material usage and cost.We will calculate two variances for direct materials:a.MATERIAL PRICE VARIANCEb.MATERIAL QUANTITY VARIANCE
To calculate material variances, three costs are needed:
Material Variances
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Material variances indicate how close actual material usage and cost were to standard material usage and cost.We will calculate two variances for direct materials:a.MATERIAL PRICE VARIANCEb.MATERIAL QUANTITY VARIANCE
To calculate material variances, three costs are needed:
Material Variance Calculations
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Material Variances for Fast-Food Funthings
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Labor Variance Calculations
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Labor Variances for Fast-Food Funthings
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Labor variances are analyzed in a similar manner to materials variances.We will calculate two variances for direct labor:a.LABOR RATE VARIANCEb.LABOR EFFICIENCY VARIANCE
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June Company reports the following information for the first quarter of 2010:
Units produced 24,600 units
Standard pounds per unit 2.5 pounds
Standard labor hours per unit 2 hours
Total number of pounds used in production 60,000 pounds
Standard cost per pound $8.50
Actual cost per labor hour $10.25
Actual cost per pound $8.80
Standard cost per labor hour $10.15
Total number of direct labor hours worked 49,000 hours
Calculate all variances for materials and labor for June Co.
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MPV = ($8.80 - $8.50) X 60,000 = $18,000 U
MQV = $8.50 X (60,000 lbs. – 61,500 lbs) = $12,750 F
LRV = ($10.25 - $10.15) X 49,000 hours = $4,900 U
LEV = $10.15 X (49,000 hours – 49,200 hours) = $2,030 F
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THE END!
