Beruflich Dokumente
Kultur Dokumente
Chapter 9
FB2101(2010/11 Sem B)
Understand why
organizations budget and
the processes they use to
create budgets.
McGraw-Hill/Irwin Slide 2
The Basic Framework of Budgeting
McGraw-Hill/Irwin Slide 3
Planning and Control
Planning
Planning Control
Control
involves
involves developing
developing involves
involves thethe steps
steps taken
taken by
by
objectives
objectives and
and management
management to to increase
increase
preparing
preparing various
various the
the likelihood
likelihood that
that the
the
budgets
budgets to
to achieve
achieve objectives
objectives setset down
down while
while
those
those objectives.
objectives. planning
planning are are attained
attained and
and
that
that all
all parts
parts of
of the
the
organization
organization are are working
working
together
together toward
toward that
that goal.
goal.
McGraw-Hill/Irwin Slide 4
Advantages of Budgeting
Define goals
and objectives
Communicate
plans
Advantages
Coordinate Means of allocating
activities resources
Uncover potential
bottlenecks
McGraw-Hill/Irwin Slide 5
Responsibility Accounting
Managers should be
held responsible for
those items - and only
those items - that they
can actually control
to a significant extent.
McGraw-Hill/Irwin Slide 6
Choosing the Budget Period
Operating Budget
Operating
Operating budgets
budgets ordinarily
ordinarily AA continuous
continuous budget
budget is
is aa
cover
cover aa one-year
one-year period
period 12-month
12-month budget
budget that
that rolls
rolls
corresponding to a companys
corresponding to a companys forward one month (or quarter)
fiscal year. Many companies forward one month (or quarter)
fiscal year. Many companies as the current month (or quarter)
divide their annual budget as the current month (or quarter)
divide their annual budget is
into four quarters. is completed.
completed.
into four quarters.
McGraw-Hill/Irwin Slide 7
Self-Imposed Budget
Top M anagem ent
M id d le M id d le
M anagem ent M anagem ent
S u p e r v is o r S u p e r v is o r S u p e r v is o r S u p e r v is o r
McGraw-Hill/Irwin Slide 8
Advantages of Self-Imposed Budgets
1.
1. Individuals
Individuals at
at all
all levels
levels of
of the
the organization
organization are
are viewed
viewed as
as
members
members of of the
the team
team whose
whose judgments
judgments are
are valued
valued by
by top
top
management.
management.
2.
2. Budget
Budget estimates
estimates prepared
prepared by
by front-line
front-line managers
managers are
are
often
often more
more accurate
accurate than
than estimates
estimates prepared
prepared by
by top
top
managers.
managers.
3.
3. Motivation
Motivation isis generally
generally higher
higher when
when individuals
individuals participate
participate
in
in setting
setting their
their own
own goals
goals than
than when
when the
the goals
goals are
are
imposed
imposed from
from above.
above.
4.
4. A
A manager
manager who
who is
is not
not able
able to to meet
meet aa budget
budget imposed
imposed
from
from above
above can
can claim
claim that
that itit was
was unrealistic.
unrealistic. Self-imposed
Self-imposed
budgets
budgets eliminate
eliminate this
this excuse.
excuse.
McGraw-Hill/Irwin Slide 9
Self-Imposed Budgets
Self-imposed budgets should be reviewed
by higher levels of management to
prevent budgetary slack.
Most companies issue broad guidelines in
terms of overall profits or sales. Lower
level managers are directed to prepare
budgets that meet those targets.
McGraw-Hill/Irwin Slide 10
Human Factors in Budgeting
The success of a budget program depends on three
important factors:
1.Top management must be enthusiastic and
committed to the budget process.
2.Top management must not use the budget to
pressure employees or blame them when
something goes wrong.
3.Highly achievable budget targets are usually
preferred when managers are rewarded based on
meeting budget targets.
McGraw-Hill/Irwin Slide 11
The Budget Committee
A
A standing
standing committee
committee responsible
responsible for
for
overall
overall policy
policy matters
matters relating
relating to
to the
the budget
budget
coordinating
coordinating the
the preparation
preparation ofof the
the budget
budget
resolving
resolving disputes
disputes related
related to
to the
the budget
budget
approving
approving the
the final
final budget
budget
McGraw-Hill/Irwin Slide 12
The Master Budget: An Overview
Sales
Sales budget
budget
Selling
Selling and
and
Ending
Ending inventory
inventory administrative
administrative
Production
Production budget
budget
budget
budget budget
budget
Direct
Direct materials
materials Direct
Direct labor
labor Manufacturing
Manufacturing
budget
budget budget
budget overhead
overhead budget
budget
Cash
Cash Budget
Budget
Budgeted
Budgeted Budgeted
Budgeted
income
income balance
balance sheet
sheet
statement
statement
McGraw-Hill/Irwin Slide 13
Learning Objective 2
McGraw-Hill/Irwin Slide 14
Budgeting Example
McGraw-Hill/Irwin Slide 15
The Sales Budget
McGraw-Hill/Irwin Slide 16
Expected Cash Collections
McGraw-Hill/Irwin Slide 17
Expected Cash Collections
McGraw-Hill/Irwin Slide 18
Expected Cash Collections
From
From the
the Sales
Sales Budget
Budget for
for April.
April.
McGraw-Hill/Irwin Slide 19
Expected Cash Collections
From
From the
the Sales
Sales Budget
Budget for
for May.
May.
McGraw-Hill/Irwin Slide 20
Quick Check
McGraw-Hill/Irwin Slide 21
Expected Cash Collections
McGraw-Hill/Irwin Slide 22
Learning Objective 3
Prepare a
production budget.
McGraw-Hill/Irwin Slide 23
The Production Budget
Sales Production
Budget Budget
ed
and l et
p
Expected
o m
C
Cash
Collections
McGraw-Hill/Irwin Slide 25
The Production Budget
McGraw-Hill/Irwin Slide 26
The Production Budget
March 31
ending inventory
McGraw-Hill/Irwin Slide 27
Quick Check
McGraw-Hill/Irwin Slide 28
The Production Budget
McGraw-Hill/Irwin Slide 29
The Production Budget
McGraw-Hill/Irwin Slide 31
The Direct Materials Budget
At Royal Company, five pounds of material are
required per unit of product.
Management wants materials on hand at the
end of each month equal to 10% of the
following months production.
On March 31, 13,000 pounds of material are
on hand. Material cost is $0.40 per pound.
McGraw-Hill/Irwin Slide 32
The Direct Materials Budget
From
From production
production budget
budget
McGraw-Hill/Irwin Slide 33
The Direct Materials Budget
McGraw-Hill/Irwin Slide 34
The Direct Materials Budget
March 31 inventory
How
How much
much materials
materials should
should be
be purchased
purchased in
in May?
a.
a. 221,500
221,500 pounds
pounds
b.
b. 240,000
240,000 pounds
pounds
c.
c. 230,000
230,000 pounds
pounds
d.
d. 211,500
211,500 pounds
pounds
McGraw-Hill/Irwin Slide 36
The Direct Materials Budget
McGraw-Hill/Irwin Slide 37
The Direct Materials Budget
McGraw-Hill/Irwin Slide 38
Expected Cash Disbursement for Materials
Royal pays $0.40 per pound for its materials.
One-half of a months purchases is paid for in the
month of purchase; the other half is paid in the
following month.
The March 31 accounts payable balance is
$12,000.
Lets calculate expected cash disbursements.
McGraw-Hill/Irwin Slide 39
Expected Cash Disbursement for Materials
McGraw-Hill/Irwin Slide 40
Expected Cash Disbursement for Materials
What
What are
are the
the total
total cash
cash disbursements
disbursements for
for the
the
quarter?
quarter?
a.
a. $185,000
$185,000
b.
b. $$ 68,000
68,000
c.
c. $$ 56,000
56,000
d.
d. $201,400
$201,400
McGraw-Hill/Irwin Slide 42
Expected Cash Disbursement for Materials
McGraw-Hill/Irwin Slide 43
Learning Objective 5
Prepare a direct
labor budget.
McGraw-Hill/Irwin Slide 44
The Direct Labor Budget
At Royal, each unit of product requires 0.05 hours (3
minutes) of direct labor.
The Company has a no layoff policy so all employees
will be paid for 40 hours of work each week.
For purposes of our illustration assume that Royal has a
no layoff policy, workers are pay at the rate of $10 per
hour regardless of the hours worked.
For the next three months, the direct labor workforce will
be paid for a minimum of 1,500 hours per month.
Lets prepare the direct labor budget.
McGraw-Hill/Irwin Slide 45
The Direct Labor Budget
McGraw-Hill/Irwin Slide 46
The Direct Labor Budget
McGraw-Hill/Irwin Slide 47
The Direct Labor Budget
Greater
Greater of
of labor
labor hours
hours required
required
or
or labor
labor hours
hours guaranteed.
guaranteed.
McGraw-Hill/Irwin Slide 48
The Direct Labor Budget
McGraw-Hill/Irwin Slide 49
Quick Check
McGraw-Hill/Irwin Slide 50
Learning Objective 6
Prepare a
manufacturing
overhead budget.
McGraw-Hill/Irwin Slide 51
Manufacturing Overhead Budget
At
At Royal,
Royal, manufacturing
manufacturing overhead
overhead is is applied
applied toto units
units
of
of product
product onon the
the basis
basis of
of direct
direct labor
labor hours.
hours.
The
The variable
variable manufacturing
manufacturing overhead
overhead rate
rate is
is $20
$20 per
per
direct
direct labor
labor hour.
hour.
Fixed
Fixed manufacturing
manufacturing overhead
overhead is is $50,000
$50,000 per
per month,
month,
which
which includes
includes $20,000
$20,000 ofof noncash
noncash costs
costs (primarily
(primarily
depreciation
depreciation ofof plant
plant assets).
assets).
Lets
Lets prepare
prepare the
the manufacturing
manufacturing overhead
overhead budget.
budget.
McGraw-Hill/Irwin Slide 52
Manufacturing Overhead Budget
Direct
Direct Labor
Labor Budget.
Budget.
McGraw-Hill/Irwin Slide 53
Manufacturing Overhead Budget
* rounded
McGraw-Hill/Irwin Slide 54
Manufacturing Overhead Budget
Depreciation
Depreciation is
is aa noncash
noncash charge.
charge.
McGraw-Hill/Irwin Slide 55
Ending Finished Goods Inventory Budget
Direct
Direct materials
materials
budget
budget and
and information.
information.
McGraw-Hill/Irwin Slide 56
Ending Finished Goods Inventory Budget
Direct
Direct labor
labor budget.
budget.
McGraw-Hill/Irwin Slide 57
Ending Finished Goods Inventory Budget
McGraw-Hill/Irwin Slide 58
Ending Finished Goods Inventory Budget
Production
Production Budget.
Budget.
McGraw-Hill/Irwin Slide 59
Learning Objective 7
McGraw-Hill/Irwin Slide 60
Selling and Administrative Expense Budget
At Royal, the selling and administrative expense budget is
divided into variable and fixed components.
The variable selling and administrative expenses are $0.50
per unit sold.
Fixed selling and administrative expenses are $70,000 per
month.
The fixed selling and administrative expenses include
$10,000 in costs primarily depreciation that are not cash
outflows of the current month.
McGraw-Hill/Irwin Slide 61
Selling and Administrative Expense Budget
McGraw-Hill/Irwin Slide 63
Selling Administrative Expense Budget
McGraw-Hill/Irwin Slide 64
Learning Objective 8
Prepare a cash
budget.
McGraw-Hill/Irwin Slide 65
Format of the Cash Budget
The cash budget is divided into four sections:
1. Cash receipts section lists all cash inflows excluding cash
received from financing;
2. Cash disbursements section consists of all cash payments
excluding repayments of principal and interest;
3. Cash excess or deficiency section determines if the
company will need to borrow money or if it will be able to
repay funds previously borrowed; and
4. Financing section details the borrowings and repayments
projected to take place during the budget period.
McGraw-Hill/Irwin Slide 66
The Cash Budget
Schedule
Schedule of
of Expected
Expected
Cash
Cash Collections.
Collections.
McGraw-Hill/Irwin Slide 68
The Cash Budget
Schedule
Schedule of
of Expected
Expected
Cash
Cash Disbursements.
Disbursements.
Direct Labor
Budget.
Manufacturing
Overhead Budget.
McGraw-Hill/Irwin Slide 69
The Cash Budget
McGraw-Hill/Irwin Slide 70
The Cash Budget
McGraw-Hill/Irwin Slide 71
The Cash Budget
McGraw-Hill/Irwin Slide 72
Quick Check
McGraw-Hill/Irwin Slide 73
The Cash Budget
McGraw-Hill/Irwin Slide 74
The Budgeted Income Statement
Cash Budgeted
Budget Income
Statement
t ed
e
pl
om
C
McGraw-Hill/Irwin Slide 75
Learning Objective 9
Prepare a budgeted
income statement.
McGraw-Hill/Irwin Slide 76
The Budgeted Income Statement
Sales
Sales Budget.
Budget.
Royal Company
Budgeted Income Statement
For the Three Months Ended June 30
Ending
Ending Finished
Finished
Sales (100,000 units @ $10) $ 1,000,000 Goods
Cost of goods sold (100,000 @ $4.99) 499,000
Goods Inventory.
Inventory.
Gross margin 501,000
Selling and administrative expenses 260,000 Selling
Selling and
and
Operating income 241,000 Administrative
Administrative
Interest expense 2,000
Expense
Expense Budget.
Budget.
Net income $ 239,000
Cash
Cash Budget.
Budget.
McGraw-Hill/Irwin Slide 77
Learning Objective 10
Prepare a
budgeted balance
sheet.
McGraw-Hill/Irwin Slide 78
The Budgeted Balance Sheet
McGraw-Hill/Irwin Slide 79
McGraw-Hill/Irwin Slide 80
Beginning balance $146,150
Add: net income 239,000
Deduct: dividends (49,000)
Ending balance $336,150
McGraw-Hill/Irwin Slide 81
End of Chapter 9
McGraw-Hill/Irwin Slide 82