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CHAPTER 9most recent - CHAPTER 9 PROFIT PLANNING I. The...

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Unformatted text preview: CHAPTER 9 PROFIT PLANNING I. The Budget A. Definition B. Planning vs. control C. Advantages of budgeting (pg. 379) D. Responsibility accounting E. Budget period F. Success of budgeting 1. self-imposed 2. Problems with self-imposed budgets a. b. Budget slack II. The Master Budget Mfg. co. Merchandising co. A. The sales budget. yes yes B. The production budget yes purchases budget 1. the direct materials budget yes no 2. the direct labor budget yes no 3. the manufacturing overhead budget yes no C. The finished goods inventory budget yes no D. The selling and administrative expense budget yes yes E. The cash budget yes yes 1. budgeted cash receipts 2. budgeted cash disbursements 3. excess or deficiency 4. financing section F. Budgeted financial statements 9-1 MASTER BUDGET EXAMPLE Superior Company is preparing budgets for the quarter ended June 30. The information below relates to the company's budgets which appear on the following pages. 1. The budgeted balance sheet for March appears below: March 31, 20x1 Cash $40,200 Accounts. Rec. 41,600 Finished Goods Inv. (4,400 @ $6.5) 28,600 Raw Materials Inv. (13,450 lbs. @ $.40) 5,380 Plant & Equip 218,000 Accumulated Depr. (50,200) Total $283,580) Accounts Pay. $ 11,000 Income Tax Pay 50,000 Note Payable Common Stock 91,380 Retained Earnings 131,200 Total $283,580) 2. Budgeted sales in units for the next five months and actual sales for March are: February, 12,000 March, 16,000 June, 30,000 April, 22,000 July, 25,000 May, 46,500 August, 15,000 3. Units of product sell for $10 each. 4. Sales cash 60% credit 40% 50% of the credit sales (or 20% of total sales) are collected in the month of sale; 30% of credit sales (or 12% of total sales) are collected in the month following sale, and the remainder (or 8% of total sales) are collected in the second month following sale. CLASS PREP 1: SALES BUDGET Refer to pgs. 389 in the text. Complete the Sales budget below. 9-2 Sales budget (Exhibit A) April May June Quarter Budgeted unit sales x selling price per unit Total budgeted sales revenue CLASS PREP 2: CASH COLLECTIONS Refer again to pgs. 389-390 in the text and the information provided above. Fill in the schedule of expected cash collections (Exhibit B) for the month of April and determine the ending balance of Accounts Receivable. Schedule of Expected Cash Collections (Exhibit B) April May June Quarter Cash sales (60%) February credit sales (8%) (8%) March sales (12%) (12%) 8% (8%) April credit sales (20%) (20%) 12% (12%) 8% (8%) May credit sales (20%) (20%) 12% (12%) June credit sales (20%) (20%) Total collections Accounts receivable 20% of current month 8% from prior month Total 5. The company desires to have finished inventory on hand at the end of each month equal to 20% of the following month's budgeted sales in units. On March 31, the inventory requirement was met....
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This note was uploaded on 04/15/2008 for the course PSC 101 taught by Professor Thomas during the Spring '08 term at Baylor.

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CHAPTER 9most recent - CHAPTER 9 PROFIT PLANNING I. The...

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