Chapter 8 - Chapter 8 Profit Planning I Budgets A Formal quantitative expression of management's plans B Advantages 1 Planning 2 Control 3

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Chapter 8 Profit Planning I. Budgets A. Formal, quantitative expression of management’s plans B. Advantages 1. Planning 2. Control 3. Communication and Coordination II. Master Budget A. Prepare the Operating Budget (Profit Plan) 1. Sales Budget (8-1) a. The foundation for the entire master budget b. Details the expected credit, cash, and total sales 2. Production Budget (8-2) Expected sales in units + Desired ending inventory in units Beginning inventory in units = units to be produced 3. Direct Materials Purchases Budget (8-3) Quantity of direct materials needed for production + desired ending inventory of direct materials Beginning inventory of direct materials = quantity of materials to be purchased X the expected cost of materials = cost of DM Purchased 4. Direct Labor Budget (8-4) Quantity of DL needed for production X DL Rate 5. OH Budget (8-5) a. Variable = Budgeted Variable Overhead Rate x Budgeted Activity b. Fixed = Remains unchanged over a relevant range 6. COGS Budget(8-7)
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This note was uploaded on 04/12/2008 for the course AIM 2302 taught by Professor Bortz during the Spring '08 term at University of Texas at Dallas, Richardson.

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Chapter 8 - Chapter 8 Profit Planning I Budgets A Formal quantitative expression of management's plans B Advantages 1 Planning 2 Control 3

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