UCF-ACG2071 Ch. 9 The Master Budget

UCF-ACG2071 Ch. 9 The Master Budget - C ha pt er 9 Bu dget...

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Unformatted text preview: C ha pt er 9 Bu dget in g E x a m ples E x a m ple #1 F i r st S econ d S al es PL U S Thi r d 30,000 F ou r th 40,000 22,500 .20 X 40,000 = 8,000 .20 X 22,500 = 4,500 .20 X 27500 = 5500 En di n g In ven tor y MINU S 8000 6000 (given i n pr oblem) Begi n n i n g In ven tor y EQU AL S Pr odu cti on Bu dget i n U n i ts (EI from F ir st Qu arter ) 32,000 36,500 5500 (EI from Thi rd Qu ar ter ) 23,500 28,900 Direct Ma t eria ls Pu rcha s es Bu dget : Un it s of A Times 2 gallons per un it Firs t you ha ve t o do a produ ct ion b u dget , in order t o do a direct m a t eria ls b u dget : Produ ct ion Bu dget : Oct ob er S a les in u n it s Plu s E n din g In v. Of Produ ct A Un it s n eeded les s b eg. In ven t ory of Produ ct A Un it s of Produ ct A t ha t n eed t o b e produ ced 4500 (EI fr om Secon d Qua rter) Exampl e #2 27,500 .20 X 34500 = 6900 DM Bu dget 183000 2 Total Gallons needed for production E x a m ple #3 366000 Plu s des ired E n din g In v. les s b eg. E n din g in v. DM t o b e pu rcha s ed 200000 8000 208000 25000 183000 21000 16000 371000 E ye C a re C om pa n y Cash Receipts May S a les C ollect ion s : Ma y s a les $180, 000 June $180, 000 x 25% $45, 000 July $220, 000 $300, 000 August $380, 000 September $350, 000 $180, 000 x 65% $117, 000 $220, 000 x 25% $55, 000 $220, 000 x 65% $143, 000 $220, 000 x 5% $11, 000 $300, 000 x 25% $75, 000 $300, 000 x 65% $195, 000 $300, 000 x 5% $15, 000 $380, 000 x 25% $95, 000 Ju n e s a les $180, 000 x 5% $9, 000 $380, 000 x 65% $247, 000 Ju ly s a les A u gu s t s a les S ept em b er s a les $350, 000 x 25% $87, 500 Tot a l ca s h receipt s : $45, 000 $172, 000 $227, 000 $301, 000 $349, 500 Note: this schedule shows cash collected from sales. Any u ncollected credit sales at any month end wou ld make up the balance of the Accou nts Receivable accoun t on the balan ce sheet. Eye Care Company Cash Disbursements Pu rcha s es C a s h pa id f or pu rcha s es S a la ries a n d wa ges A dvert is in g Ren t pa ym en t s E qu ipm en t Tot a l ca s h dis b u rs em en t s $180, 000 July ( A /P Ba l) $135, 000 $228, 000 $210, 000 August September $180, 000 $228, 000 $30, 000 $80, 000 $6, 000 $32, 000 $80, 000 $6, 000 $14, 000 $0 $32, 000 $70, 000 $6, 000 $0 $265, 000 $298, 000 $336, 000 Eye Care Company Cash Summary Budget July August Begin n in g ca s h b a la n ce $30, 000 + C a s h receipt s $227, 000 ­ C a s h dis b u rs em en t s $265, 000 S u b t ot a l ­$8, 000 Loa n $20, 000 In t eres t $0 E n din g ca s h b a la n ce* * $12, 000 * * t his wou ld b e t he ca s h b a la n ce s hown on t he b u dget b a la n ce s heet a s well. S a les Cost of Goods Sold (50% of sales)* G ros s Prof it E x pen s es : S a la ries a n d Wa ges A dvert is in g Ren t Deprecia t ion In t eres t E x pen s e * * Tot a l E x pen s es In com e Eye Care Company is a merchandiser, not a manufacturer. Therefore, they do not prepare a production budget, or direct materials, direct labor or factory overhead budgets. Eye Care Company purchases their products from a supplier, Where them up, and sells them. marks is depreciati on expense? See the note below. September $12, 000 $301, 000 $298, 000 $15, 000 $0 $0 $15, 000 $15, 000 $349, 500 $336, 000 $28, 500 ­$20, 000 ­$600 $7, 900 E ye C a re Bu dget ed In com e S t a t em en t Ju ly A u gu s t $300, 000 $380, 000 $150, 000 $190, 000 $150, 000 $190, 000 S ept em b er $350, 000 $175, 000 $175, 000 $30, 000 $80, 000 $6, 000 $5, 000 $200 $121, 200 $32, 000 $80, 000 $6, 000 $5, 000 $200 $123, 200 $32, 000 $70, 000 $6, 000 $5, 000 $200 $113, 200 $28, 800 $66, 800 $61, 800 * * In t eres t pa id on t he loa n wa s $600. It wa s pa id a t t he en d of t he qu a rt er f rom a ca s h f low poin t of view. Bu t t he in com e s t a t em en t is b a s ed on reven u es t ha t a re ea rn ed a n d ex pen s es t ha t a re in cu rred ­ n ot n eces s a rily when we receive or pa y t hem in ca s h. S o f rom a G A A P in com e s t a t em en t pers pect ive we wou ld ex pen s e $200 of in t eres t ea ch m on t h ( a s s u m in g t ha t $600/3 m on t hs = $200 per m on t h in t eres t ex pen s e) Remember, depreciation expense does not involve spending cash dollars so it is not on the cash summary budget. We do include it on the budgeted income statement however, as it is an expense that goes into calculating net income. We spend the cash when we purchase an asset, not when we depreciate it (that is why the $14,000 of purchased equipment is on the Cash Disbursements Budget.) * The prob lem ga ve t he f a ct t ha t m ercha n dis e cos t is rou ghly ha lf of s ellin g price. For ex a m ple t his m ea n s t ha t if t hey s ell t heir produ ct f or $100, t heir wholes a le m ercha n dis e cos t is $50. Theref ore, cos t of goods s old is 50% of s ellin g price. E x a m ple #4 Un it s t o s ell Un it S P Tot a l S a les in dolla rs A pril 20000 $25 $500, 000 Ma y 30000 $25 $750, 000 Ju n e 25000 $25 $625, 000 S plit b et ween ca s h a n d credit s a les : C a s h @ 20% C redit @ 80% $100, 000 $400, 000 $150, 000 $600, 000 $125, 000 $500, 000 C om pu t a t ion of ca s h receipt s f or Ma y: From ca s h s a les From A pril' s credit s a les Tot a l ca s h receipt s f or Ma y $150, 000 $400, 000 $550, 000 E x a m ple #5 Un it s t o produ ce du rin g Ju ly t im es u n it s of DM t o a f in is hed u n it Un it s of DM n eeded t o s u pport produ ct ion Plu s en din g des ired en din g in ven t ory m in u s b eg. In ven t ory Un it s of X n eeded t o pu rcha s e t im es cos t per u n it Tot a l DM pu rcha s es b u dget in dolla rs 25000 2 pou n ds 50000 1000 2000 49000 $4. 00 $196, 000 E x a m ple #6 S a les in Un it s Un it s ellin g price S a les in dolla rs Novem b er 80000 $5 $384, 000 Decem b er 120000 $5 $576, 000 Cash C redit $115, 200 $268, 800 $172, 800 $403, 200 A /R b a la n ce a s of Nov 30t h will b e $268800 which is Novem b er s a les . E x a m ple #7 Produ ct ion Bu dget S a les Foreca s t in Un it s Plu s des ired E U Les s b eg. In v. = u n it s t o produ ce DM Pu rcha s es b u dget : Un it s t o produ ce t im es 2 ga llon s plu s des ired E I les s BI u n it s of DM t o pu rcha s e t im es $8. 00 Oct 30000 2500 1700 30800 Nov 50000 2250 2500 49750 30800 61600 0 0 61600 $492, 800. 00 49750 99500 0 0 99500 $796, 000. 00 Dec 45000 1750 2250 44500 Ja n 35000 44500 89000 0 0 89000 $712, 000. 00 < ­ DM pu rcha s es b u dget in dolla rs . E x a m ple #8 C ollect ion Ta b le Mon t h of S a le Mon t h f ollowin g s a le S econ d m on t h f ollowin g s a le 15% 60% 25% C a s h Bu dget ­ Receipt s S a les C ollect ion s : From C u rren t Mon t h From Prior Mon t h From S econ d Mon t h Prior Tot a l C a s h C ollect ion s April May June July $3, 200 $2, 000 $3, 000 $2, 800 $480 $300 $1,920 $450 $1,200 $800 $420 $1,800 $500 $2, 450 $2, 720 $480 $2, 220 January February Pu rcha s es $50, 000 $40, 000 Dis b u rs em en t s on Pu rcha s es : From C u rren t Mon t h' s Pu rcha s es From La s t Mon t h' s Pu rcha s es Paid for in mon th of $70, 000 purchase Paid for in mon th after $40, 000 $32, 000 $10, 000 $56, 000 $8, 000 Dis b u rs em en t f rom A /P a t 1/1 $20, 000 Tot a l Dis b u rs em en t s f or Pu rcha s es C a s h Opera t in g C os t s Tot a l C a s h Dis b u rs em en t s $60, 000 $5, 000 $65, 000 $42, 000 $6, 000 $48, 000 $64, 000 $10, 000 $74, 000 E x a m ple #9 March Dis b u rs em en t Ta b le 80% 20% E x a m ple #10 September October Novem b er Begin n in g C a s h Ba la n ce $16, 100 $40, 800 $40, 100 C a s h Receipt s $62, 900 $71, 600 C a s h Dis b u rs em en t s $45, 200 $77, 300 Net C a s h Ba la n ce $33, 800 $35, 100 Min im u m ca s h requ ired $40, 000 $40, 000 $7,000 $5,000 A m ou n t t o b orrow In t eres t du e E n din g Ba la n ce C a lcu la t ion of In t eres t : $40, 800 $40, 100 a s s u m es t ha t in t eres t is pa id when t he loa n is pa id of f . C a n on ly b orrow in in crem en t s of $1000 rem em b er m on ey is b orrowed on t he f irs t da y of t he m on t h. a n d pa id b a ck on t he la s t da y of t he m on t h. 9/1 b orrowed 7, 000 x . 12 x 3/12 = $210 10/1 b orrowed 5, 000 x . 12 x 2/12 = $100 Tot a l in t eres t = $310 Remember, when you see interest rates in the business world, they are usually stated on an annual interest rate basis. $65, 000 So they would pay 12% interest if the loan was $70, 100 outstanding for all of the year. It wasn't, so, we $40, 000 have to adjust the interest accordingly. $( 12, 000) C a n pa y b a ck loa n $( 310) $95, 000 $57, 790 <­­this is the ending balance of cash reported on the budgeted balance sheet. ( 7000 wa s b orrowed f or 3 m on t hs ) ( 5000 wa s b orrowed f or 2 m on t hs ) ...
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