ACT305 Module 8 - Budgeting.pdf

ACT305 Module 8 - Budgeting.pdf

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Running head: BUDGETING 1 Budgeting Michael Hames ACT305 Principles of Managerial Accounting Colorado State University Global Campus Dr. Timothy Kenny July 26, 2015
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BUDGETING 2 Budgeting Companies must budget to determine the benefits of manufacturing a particular job. The information in this budget is among the most important of the various departmental budget models, since it may contain a large portion of the total amount of a company’s expenditures. These types of budgets are typically presented in either a monthly or quarterly format. In this paper a budget will be given for the manufacturing of toy cars. Manufacturing Budget The manufacturing overhead budget contains all manufacturing costs other than the costs of direct materials and direct labor. These costs are itemized separately in the direct materials budget and direct labor budget. The information in the manufacturing overhead budget becomes part of the cost of goods sold line item in the master budget. The total of all the costs in this overhead budget are converted into a per unit overhead allocation, which is used to derive the cost of ending finished goods inventory, and which turn in listed on the budgeted balance sheet. Toy Car Manufacturing Process Each toy car requires ½ pound of granulated high grade polyethylene plastic which is environmentally friendly and structurally stable. This plastic which is harmless to humans is heated to 400 degrees Fahrenheit and sent through a molding machine. After the mold is complete, all edges are smoothed over and sent to receive 4 tires. Next on the line is the cars circuit board with sound and 2 lights. The last step is a quality inspection of all working components. The final product is then packaged and staged for shipment.
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BUDGETING 3 Estimated First Quarter Budgets TOY CAR COMPANY Sales Budget for Quarter January March 2015 January February March Quarter Sales Unit 25000 25000 25000 75000 Sales Price Per Unit 13 13 13 13 Total collections $325,000 $325,000 $325,000 $975,000 Parts Required Plastic Required ½ pound per car 2 lights and 4 tires per car,
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