The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin BIS Budgeting Information System.
-
Upload
doris-bond -
Category
Documents
-
view
216 -
download
0
Transcript of The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin BIS Budgeting Information System.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
BISBudgeting Information System
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-2
Key Purposes of the Budgeting System
The five primary purposes are:The five primary purposes are:1.1. Planning. Planning.
2.2. Facilitating Communication and Coordination.Facilitating Communication and Coordination.
3.3. Allocating Resources.Allocating Resources.
4.4. Managing Financial and Operational Managing Financial and Operational Performance.Performance.
5.5. Evaluating Performance and Providing Evaluating Performance and Providing Incentives.Incentives.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-3
International Aspects of Budgeting
Firms with international operations face a variety of Firms with international operations face a variety of additional challenges in preparing their budgets . . .additional challenges in preparing their budgets . . .
1.1. Translation of foreign currencies into local Translation of foreign currencies into local currency.currency.
2.2. Budget preparation is difficult when inflation (or Budget preparation is difficult when inflation (or deflation) is high or unpredictable.deflation) is high or unpredictable.
3.3. The economies of all countries fluctuate in The economies of all countries fluctuate in terms of consumer demand, availability of terms of consumer demand, availability of skilled labor, and laws affecting commerce.skilled labor, and laws affecting commerce.
1.1. Translation of foreign currencies into local Translation of foreign currencies into local currency.currency.
2.2. Budget preparation is difficult when inflation (or Budget preparation is difficult when inflation (or deflation) is high or unpredictable.deflation) is high or unpredictable.
3.3. The economies of all countries fluctuate in The economies of all countries fluctuate in terms of consumer demand, availability of terms of consumer demand, availability of skilled labor, and laws affecting commerce.skilled labor, and laws affecting commerce.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-4
Illustrating the Master Budget
Schedule Title of Schedule
1 Sales Budget
2 Production Budget
3 Direct-Materials Budget
4 Direct-Labor Budget
5 Manufacturing Overhead Budget
6 Selling, General, and Administrative Expense Budget (SG&A)
7 Cash Receipts Budget
8 Cash Disbursements Budget
9 Cash Budget
10 Budgeted Schedule of Cost of Goods Manufactured and Sold
11 Budgeted Income Statement
12 Budgeted Balance Sheet
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-5
The Sales Budget
Detailed schedule showing expected sales for the coming periods
expressed in units and dollars.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-6
Sales Budget of Collegiate Apparel
Collegiate Apparel Company is preparing budgets for Collegiate Apparel Company is preparing budgets for the year ending December 31, 20x1.the year ending December 31, 20x1.
Budgeted sales are:Budgeted sales are:First quarter First quarter – 15,000 units– 15,000 unitsSecond quarter Second quarter – 5,000 units– 5,000 unitsThird quarterThird quarter – 10,000 units– 10,000 unitsFourth quarter Fourth quarter – 20,000 units– 20,000 units
The selling price is $12 per unit.The selling price is $12 per unit.
Collegiate Apparel Company is preparing budgets for Collegiate Apparel Company is preparing budgets for the year ending December 31, 20x1.the year ending December 31, 20x1.
Budgeted sales are:Budgeted sales are:First quarter First quarter – 15,000 units– 15,000 unitsSecond quarter Second quarter – 5,000 units– 5,000 unitsThird quarterThird quarter – 10,000 units– 10,000 unitsFourth quarter Fourth quarter – 20,000 units– 20,000 units
The selling price is $12 per unit.The selling price is $12 per unit.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-7
Sales Budget of Collegiate Apparel
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-8
Production Budget
Sales Sales BudgetBudget
ProductionProductionBudgetBudget
Complete
d
Plan of resources needed to meet currentPlan of resources needed to meet currentsales demand and ensure inventory levelssales demand and ensure inventory levels
are sufficient for future sales.are sufficient for future sales.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-9
Forecasting Production
Rearrange the basic inventory formula as follows . . .
Units inbeginninginventory
Units inbeginninginventory
Requiredproduction
in units
Requiredproduction
in units
Salesin
Units
Salesin
Units
Units in ending
inventory
Units in ending
inventory++ –– ==
Now, solve for required production . . .
Unitsto be
Produced
Unitsto be
Produced==
Salesin
Units
Salesin
Units++
Units in ending
inventory
Units in ending
inventory––
Expectedbeginninginventory
Expectedbeginninginventory
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-10
The Production Budget
Collegiate Apparel wants units in ending finished goods inventory to be 10% of the next quarter’s expected sales in units.
At the beginning of the year, 1,500 completed units were on hand.
During the first quarter of 20x2, 15,000 units are expected to be sold.
Let’s prepare the production budget.Let’s prepare the production budget.
Collegiate Apparel wants units in ending finished goods inventory to be 10% of the next quarter’s expected sales in units.
At the beginning of the year, 1,500 completed units were on hand.
During the first quarter of 20x2, 15,000 units are expected to be sold.
Let’s prepare the production budget.Let’s prepare the production budget.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-11
The Production Budget
5,000 5,000 × 10% = 500 units× 10% = 500 units5,000 5,000 × 10% = 500 units× 10% = 500 units
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-12
Direct-Materials Budget
Direct materials needed for the budget period Direct materials needed for the budget period can be determined as follows . . .can be determined as follows . . .
RequiredRequiredmaterialsmaterials
purchasespurchases
RequiredRequiredmaterialsmaterials
purchasespurchases==
MaterialsMaterialsused inused in
productionproduction
MaterialsMaterialsused inused in
productionproduction++
EndingEndingmaterialsmaterialsinventoryinventory
EndingEndingmaterialsmaterialsinventoryinventory
––BeginningBeginningmaterialsmaterialsinventoryinventory
BeginningBeginningmaterialsmaterialsinventoryinventory
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-13
Direct-Materials Budget
At Collegiate Apparel 1.5 yards of fabric are required At Collegiate Apparel 1.5 yards of fabric are required per unit of product.per unit of product.
Management wants fabric on hand at the end of each Management wants fabric on hand at the end of each quarter to be 10% of next quarter’s raw materials quarter to be 10% of next quarter’s raw materials required. On January 1required. On January 1stst, 2,100 yards of fabric are on-, 2,100 yards of fabric are on-hand. During the first quarter of 20x2, Collegiate hand. During the first quarter of 20x2, Collegiate expects 21,000 yards of fabric to be required.expects 21,000 yards of fabric to be required.
Each yard of fabric cost the company $2.Each yard of fabric cost the company $2.
Let’s prepare the direct materials budget.Let’s prepare the direct materials budget.
At Collegiate Apparel 1.5 yards of fabric are required At Collegiate Apparel 1.5 yards of fabric are required per unit of product.per unit of product.
Management wants fabric on hand at the end of each Management wants fabric on hand at the end of each quarter to be 10% of next quarter’s raw materials quarter to be 10% of next quarter’s raw materials required. On January 1required. On January 1stst, 2,100 yards of fabric are on-, 2,100 yards of fabric are on-hand. During the first quarter of 20x2, Collegiate hand. During the first quarter of 20x2, Collegiate expects 21,000 yards of fabric to be required.expects 21,000 yards of fabric to be required.
Each yard of fabric cost the company $2.Each yard of fabric cost the company $2.
Let’s prepare the direct materials budget.Let’s prepare the direct materials budget.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-14
Direct-Materials Budget
8,250 8,250 × 10% = 825 units× 10% = 825 units8,250 8,250 × 10% = 825 units× 10% = 825 units
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-15
Direct-Labor Budget
At Collegiate Apparel, each unit produced requires 0.20 hour (12 minutes) of direct labor.
Workers earn a wage rate of $10 per hour regardless of the hours worked. Collegiate Apparel can hire workers as needed to meet production.
Let’s prepare the direct labor budget.Let’s prepare the direct labor budget.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-16
Direct-Labor Budget
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-17
Cash Receipts Budget At Collegiate Apparel all sales are made on
account.
The company collects 80% of its billings in the quarter of the sale, 18% in the following quarter. The remaining two percent of each quarter’s sales are expected to be uncollectible.
Sales in the last quarter of 20x0 were $240,000.
Let’s prepare the Cash Receipts Budget.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-18
Cash Receipts Budget
$240,000 $240,000 × 18% = $43,200× 18% = $43,200$240,000 $240,000 × 18% = $43,200× 18% = $43,200
$180,000 $180,000 × 2% = $3,600× 2% = $3,600$180,000 $180,000 × 2% = $3,600× 2% = $3,600
$180,000 $180,000 × 18% = $32,400× 18% = $32,400$180,000 $180,000 × 18% = $32,400× 18% = $32,400
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-19
Cash Payments for Direct-Materials At Collegiate Apparel all purchases of raw
materials are made on account.
The company pays for 60% of its purchases in the quarter of the purchase and the remaining 40% in the following quarter.
Purchases in the last quarter of 20x0 were $56,850.
Let’s prepare the Cash Receipts Budget.
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-20
Cash Payments for Direct-Materials
$18,150 $18,150 × 60% = $10,890× 60% = $10,890$18,150 $18,150 × 60% = $10,890× 60% = $10,890$39,450 $39,450 × 40% = $15,780× 40% = $15,780$39,450 $39,450 × 40% = $15,780× 40% = $15,780
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-21
How It All Fits Together
Sales forecastProduction
budgetSG&Abudget
Required directmaterials, labor
and mfg. overheadbudgets
Budgetedincome
statement
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-22
How It All Fits Together
Sales forecastProduction
budgetSG&A
budget
Required directmaterials, labor
and mfg. overheadbudgets
Budgeted costof goods mfg.
and sold
Budgetedincome
statement
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
15-23
How It All Fits Together
Sales forecastProduction
budgetSG&A
budget
Required directmaterials, labor
and mfg. overheadbudgets
Budgeted costof goods mfg.
and sold
Budgetedincome
statement
Cash budget
Budgeted balancesheet
The McGraw-Hill Companies, Inc. 2006McGraw-Hill/Irwin
SOFTWARES AVAILABLE
15-24