garrison lecture chapter 8
TRANSCRIPT
-
7/24/2019 Garrison Lecture Chapter 8
1/92
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 $
-
7/24/2019 Garrison Lecture Chapter 8
2/92
8-2
%earnin" &b'e(ti)e *
Understand why
organizations budgetand the processes they
use to create budgets.
-
7/24/2019 Garrison Lecture Chapter 8
3/92
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.
-
7/24/2019 Garrison Lecture Chapter 8
4/92
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.
-
7/24/2019 Garrison Lecture Chapter 8
5/92
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
-
7/24/2019 Garrison Lecture Chapter 8
6/92
8-6
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.
-
7/24/2019 Garrison Lecture Chapter 8
7/92
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.
-
7/24/2019 Garrison Lecture Chapter 8
8/92
8-8
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
-
7/24/2019 Garrison Lecture Chapter 8
9/92
8-9
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.
-
7/24/2019 Garrison Lecture Chapter 8
10/92
8-10
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.
-
7/24/2019 Garrison Lecture Chapter 8
11/92
8-11
-
7/24/2019 Garrison Lecture Chapter 8
12/92
8-12
+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
-
7/24/2019 Garrison Lecture Chapter 8
13/92
8-13
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.
8 14
-
7/24/2019 Garrison Lecture Chapter 8
14/92
8-14
Seein" the Bi" Pi(ture
*.
-
7/24/2019 Garrison Lecture Chapter 8
15/92
8-15
+he Master Bud"et: An &)er)iew
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.
8 16
-
7/24/2019 Garrison Lecture Chapter 8
16/92
8-16
+he Master Bud"et: An &)er)iew
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.
8 17
-
7/24/2019 Garrison Lecture Chapter 8
17/92
8-17
%earnin" &b'e(ti)e /
"repare a sales budget#
including a schedule o$e%pected cash
collections.
8 18
-
7/24/2019 Garrison Lecture Chapter 8
18/92
8-18
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.
8 19
-
7/24/2019 Garrison Lecture Chapter 8
19/92
8-19
+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
8-20
-
7/24/2019 Garrison Lecture Chapter 8
20/92
8-20
=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.
8-21
-
7/24/2019 Garrison Lecture Chapter 8
21/92
8 21
=5#e(ted Cash Colle(tions
8-22
-
7/24/2019 Garrison Lecture Chapter 8
22/92
8 22
=5#e(ted Cash Colle(tions
rom the Sales Bud"et -or A#ril.rom the Sales Bud"et -or A#ril.
8-23
-
7/24/2019 Garrison Lecture Chapter 8
23/92
8 23
=5#e(ted Cash Colle(tions
rom the Sales Bud"et -or Ma.rom the Sales Bud"et -or Ma.
8-24
-
7/24/2019 Garrison Lecture Chapter 8
24/92
Hui(k Che(k
What will be the total (ash (olle(tions -orthe uarter?
a. F>>,>>>b. F//>,>>>
(. F*>,>>>
d. F>@,>>>
8-25
-
7/24/2019 Garrison Lecture Chapter 8
25/92
What will be the total (ash (olle(tions -orthe uarter?
a. F>>,>>>b. F//>,>>>
(. F*>,>>>
d. F>@,>>>
Hui(k Che(k
8-26
-
7/24/2019 Garrison Lecture Chapter 8
26/92
=5#e(ted Cash Colle(tions
8-27
-
7/24/2019 Garrison Lecture Chapter 8
27/92
%earnin" &b'e(ti)e 8
"repare a production
budget.
8-28
-
7/24/2019 Garrison Lecture Chapter 8
28/92
+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.
8-29
-
7/24/2019 Garrison Lecture Chapter 8
29/92
+he Produ(tion Bud"et
+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.
8-30
-
7/24/2019 Garrison Lecture Chapter 8
30/92
+he Produ(tion Bud"et
8-31
-
7/24/2019 Garrison Lecture Chapter 8
31/92
+he Produ(tion Bud"et
Mar(h 8*Mar(h 8*endin" in)entor.endin" in)entor.
Mar(h 8*Mar(h 8*
endin" in)entor.endin" in)entor.
8-32
-
7/24/2019 Garrison Lecture Chapter 8
32/92
Hui(k Che(k
What is the reuired #rodu(tion -or Ma?
a. @,>>> units
b. 9,>>> units
(. /,>>> units
d. @/,>>> units
What is the reuired #rodu(tion -or Ma?
a. @,>>> units
b. 9,>>> units
(. /,>>> units
d. @/,>>> units
8-33
-
7/24/2019 Garrison Lecture Chapter 8
33/92
What is the reuired #rodu(tion -or Ma?
a. @,>>> units
b. 9,>>> units
(. /,>>> units
d. @/,>>> units
What is the reuired #rodu(tion -or Ma?
a. @,>>> units
b. 9,>>> units
(. /,>>> units
d. @/,>>> units
Hui(k Che(k
8-34
-
7/24/2019 Garrison Lecture Chapter 8
34/92
+he Produ(tion Bud"et
8-35
-
7/24/2019 Garrison Lecture Chapter 8
35/92
+he Produ(tion Bud"et
Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.
8-36
-
7/24/2019 Garrison Lecture Chapter 8
36/92
%earnin" &b'e(ti)e 9
"repare a direct
,aterials budget#
including a schedule o$e%pected cash
disburse,ents $or
purchases o$ ,aterials.
8-37
-
7/24/2019 Garrison Lecture Chapter 8
37/92
+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.
8-38
-
7/24/2019 Garrison Lecture Chapter 8
38/92
+he Dire(t Materials Bud"et
rom #rodu(tion bud"et.rom #rodu(tion bud"et.
8-39
-
7/24/2019 Garrison Lecture Chapter 8
39/92
+he Dire(t Materials Bud"et
8-40
-
7/24/2019 Garrison Lecture Chapter 8
40/92
+he Dire(t Materials Bud"et
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.
8-41
-
7/24/2019 Garrison Lecture Chapter 8
41/92
Hui(k Che(k
> #ounds
b. /9>,>>> #ounds
(. /8>,>>> #ounds
d. /**,@>> #ounds
> #ounds
b. /9>,>>> #ounds
(. /8>,>>> #ounds
d. /**,@>> #ounds
8-42
-
7/24/2019 Garrison Lecture Chapter 8
42/92
> #ounds
b. /9>,>>> #ounds
(. /8>,>>> #ounds
d. /**,@>> #ounds
> #ounds
b. /9>,>>> #ounds
(. /8>,>>> #ounds
d. /**,@>> #ounds
Hui(k Che(k
8-43
-
7/24/2019 Garrison Lecture Chapter 8
43/92
+he Dire(t Materials Bud"et
8-44
-
7/24/2019 Garrison Lecture Chapter 8
44/92
+he Dire(t Materials Bud"et
Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.Assumed endin" in)entor.
8-45
-
7/24/2019 Garrison Lecture Chapter 8
45/92
=5#e(ted Cash Disbursement -orMaterials
!oal #as!oal #as $0.40$0.40per poundper pound-or its materials.-or its materials.
ne!"alfne!"alf o- a month1s #ur(hases is #aid -or ino- a month1s #ur(hases is #aid -or in
the month o- #ur(hase the other hal- is #aid inthe month o- #ur(hase the other hal- is #aid inthe -ollowin" month.the -ollowin" month.
+he Mar(h 8* a((ounts #aable balan(e is+he Mar(h 8* a((ounts #aable balan(e is
F*/,>>>.F*/,>>>.
%et1s (al(ulate e5#e(ted (ash disbursements.%et1s (al(ulate e5#e(ted (ash disbursements.
8-46
-
7/24/2019 Garrison Lecture Chapter 8
46/92
=5#e(ted Cash Disbursement -orMaterials
8-47
-
7/24/2019 Garrison Lecture Chapter 8
47/92
=5#e(ted Cash Disbursement -orMaterials
*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>*9>,>>> lbs. F>.9>lb. K F@,>>>
Com#ute the e5#e(ted (ashCom#ute the e5#e(ted (ashdisbursements -or materialsdisbursements -or materials
-or the uarter.-or the uarter.
Com#ute the e5#e(ted (ashCom#ute the e5#e(ted (ashdisbursements -or materialsdisbursements -or materials-or the uarter.-or the uarter.
8-48
-
7/24/2019 Garrison Lecture Chapter 8
48/92
Hui(k Che(k
What are the total (ash disbursements -orWhat are the total (ash disbursements -or
the uarter?the uarter?
a. F*$@,>>>a. F*$@,>>>
b. F $,>>>b. F $,>>>
(. F @,>>>(. F @,>>>
d. F/>*,9>>d. F/>*,9>>
What are the total (ash disbursements -orWhat are the total (ash disbursements -or
the uarter?the uarter?
a. F*$@,>>>a. F*$@,>>>
b. F $,>>>b. F $,>>>
(. F @,>>>(. F @,>>>
d. F/>*,9>>d. F/>*,9>>
8-49
-
7/24/2019 Garrison Lecture Chapter 8
49/92
What are the total (ash disbursements -orWhat are the total (ash disbursements -or
the uarter?the uarter?
a. F*$@,>>>a. F*$@,>>>
b. F $,>>>b. F $,>>>
(. F @,>>>(. F @,>>>
d. F/>*,9>>d. F/>*,9>>
What are the total (ash disbursements -orWhat are the total (ash disbursements -or
the uarter?the uarter?
a. F*$@,>>>a. F*$@,>>>
b. F $,>>>b. F $,>>>
(. F @,>>>(. F @,>>>
d. F/>*,9>>d. F/>*,9>>
Hui(k Che(k
8-50
-
7/24/2019 Garrison Lecture Chapter 8
50/92
=5#e(ted Cash Disbursement -orMaterials
8-51
-
7/24/2019 Garrison Lecture Chapter 8
51/92
%earnin" &b'e(ti)e @
"repare a direct labor
budget.
8-52
-
7/24/2019 Garrison Lecture Chapter 8
52/92
+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.
8-53
-
7/24/2019 Garrison Lecture Chapter 8
53/92
+he Dire(t %abor Bud"et
rom #rodu(tion bud"et.rom #rodu(tion bud"et.rom #rodu(tion bud"et.rom #rodu(tion bud"et.
8-54
-
7/24/2019 Garrison Lecture Chapter 8
54/92
+he Dire(t %abor Bud"et
8-55
-
7/24/2019 Garrison Lecture Chapter 8
55/92
+he Dire(t %abor Bud"et
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.
8-56
-
7/24/2019 Garrison Lecture Chapter 8
56/92
+he Dire(t %abor Bud"et
8-57
-
7/24/2019 Garrison Lecture Chapter 8
57/92
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@,>>>
8-58
-
7/24/2019 Garrison Lecture Chapter 8
58/92
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
8-59
-
7/24/2019 Garrison Lecture Chapter 8
59/92
%earnin" &b'e(ti)e
"repare a ,anu$acturing
overhead budget.
8-60
-
7/24/2019 Garrison Lecture Chapter 8
60/92
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.
8-61
-
7/24/2019 Garrison Lecture Chapter 8
61/92
Manu-a(turin" &)erhead Bud"et
Dire(t %abor Bud"et.Dire(t %abor Bud"et.
8-62
-
7/24/2019 Garrison Lecture Chapter 8
62/92
Manu-a(turin" &)erhead Bud"et
+otal m-". &< -or uarter F/@*,>>>+otal labor hours reuired @,>@> K F9.> #er hour L
/ rounded/ rounded
8-63
-
7/24/2019 Garrison Lecture Chapter 8
63/92
Manu-a(turin" &)erhead Bud"et
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.
8-64
-
7/24/2019 Garrison Lecture Chapter 8
64/92
=ndin" inished Goods In)entorBud"et
Dire(t materialsDire(t materialsbud"et and in-ormation.bud"et and in-ormation.
8-65
-
7/24/2019 Garrison Lecture Chapter 8
65/92
=ndin" inished Goods In)entorBud"et
Dire(t labor bud"et.Dire(t labor bud"et.
8-66
-
7/24/2019 Garrison Lecture Chapter 8
66/92
=ndin" inished Goods In)entorBud"et
+otal m-". &< -or uarter F/@*,>>>+otal labor hours reuired @,>@>
K F9.> #er hour
8-67
-
7/24/2019 Garrison Lecture Chapter 8
67/92
=ndin" inished Goods In)entorBud"et
Produ(tion Bud"et.Produ(tion Bud"et.
8-68
-
7/24/2019 Garrison Lecture Chapter 8
68/92
%earnin" &b'e(ti)e
"repare a selling and
ad,inistrative e%pensebudget.
8-69
-
7/24/2019 Garrison Lecture Chapter 8
69/92
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.
8-70
-
7/24/2019 Garrison Lecture Chapter 8
70/92
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.
8-71
-
7/24/2019 Garrison Lecture Chapter 8
71/92
Hui(k Che(k
What are the total (ash disbursements -orsellin" and administrati)e e5#enses -or theuarter?
a. F*$>,>>>b. F/8>,>>>
(. F**>,>>>
d. F >,>>>
What are the total (ash disbursements -orsellin" and administrati)e e5#enses -or theuarter?
a. F*$>,>>>b. F/8>,>>>
(. F**>,>>>
d. F >,>>>
8-72
-
7/24/2019 Garrison Lecture Chapter 8
72/92
What are the total (ash disbursements -orsellin" and administrati)e e5#enses -or theuarter?
a. F*$>,>>>b. F/8>,>>>
(. F**>,>>>
d. F >,>>>
What are the total (ash disbursements -orsellin" and administrati)e e5#enses -or theuarter?
a. F*$>,>>>b. F/8>,>>>
(. F**>,>>>
d. F >,>>>
Hui(k Che(k
8-73
-
7/24/2019 Garrison Lecture Chapter 8
73/92
Sellin" Administrati)e =5#ense Bud"et
8-74
-
7/24/2019 Garrison Lecture Chapter 8
74/92
%earnin" &b'e(ti)e $
"repare a cash budget.
8-75
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
76/92
+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
-
7/24/2019 Garrison Lecture Chapter 8
77/92
+he Cash Bud"et
S(hedule o- =5#e(tedS(hedule o- =5#e(ted
Cash Colle(tions.Cash Colle(tions.
S(hedule o- =5#e(tedS(hedule o- =5#e(ted
Cash Colle(tions.Cash Colle(tions.
8-78
-
7/24/2019 Garrison Lecture Chapter 8
78/92
+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.
S(hedule o- =5#e(tedS(hedule o- =5#e(ted
Cash Disbursements.Cash Disbursements.
8-79
+h C h B d t
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
81/92
+he Cash Bud"et
8-82
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
86/92
%earnin" &b'e(ti)e
"repare a budgeted
inco,e state,ent.
8-87
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
88/92
%earnin" &b'e(ti)e *>
"repare a budgeted
balance sheet.
8-89
-
7/24/2019 Garrison Lecture Chapter 8
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
-
7/24/2019 Garrison Lecture Chapter 8
90/92
8-91
-
7/24/2019 Garrison Lecture Chapter 8
91/92
Beginning balance 14#1503Add net inco,e 2(#000
6educt dividends 74#0008
*nding balance ((#1503
8-92
-
7/24/2019 Garrison Lecture Chapter 8
92/92
=nd o- Cha#ter $