ACC 204 Quiz Prep Chapter 09 Handout

ACC 204 Quiz Prep Chapter 09 Handout - Dutchess Community...

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ACC 204 Chapter 9 1 Dutchess Community College ACC 204 – Managerial Accounting Quiz Prep Chapter 9 Budgetary Planning Peter Rivera March 2007 Version 1.1 Primary Benefits of Budgeting The primary benefits of budgeting are: (1)It requires all levels of management to plan ahead and to formalize goals on a recurring basis. (2)It provides definite objectives for evaluating performance at each level of responsibility. (3)It creates an early warning system for potential problems, so that management can make changes before things get out of hand. continued
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ACC 204 Chapter 9 2 (4)It facilitates the coordination of activities within the business by correlating the goals of each segment with overall company objectives. (5)It results in greater management awareness of the entity’s overall operations and the impact of external factors such as economic trends. (6)It motivates personnel throughout the organization to meet planned objectives. Primary Benefits of Budgeting Components of the Master Budget Sales Budget Production Budget Direct Labor Budget Direct Materials Budget Manufacturing Overhead Budget Budgeted Income Statement Cash Flow Budget Budgeted Balance Sheet Capital Expenditure Budget Operating Budgets Financial Budgets
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ACC 204 Chapter 9 3 Sales Budget Sales Budgets consists of • Quantity (units) • Unit Selling Price 1 Q 2 Q 3 Q 4 Q Year Expected Unit Sales 3,000 3,500 4,000 4,500 15,000 x Unit Selling Price 60 60 60 60 60 = Total Sales $ 180,000 210,000 240,000 270,000 900,000 Yellow boxes in the schedules indicate inputs. All other numbers are either calculated or carried forward from a previous schedule The Unit Selling Price for the year = Total Sales for the Year Total Expected Units for the year Production Budget 1 Q 2 Q 3 Q 4 Q Year Next Yr 1Q Expected Unit Sales 3,000 3,500 4,000 4,500 5,000 Add: Desired Ending % 20% 20% 20% 20% Add: Desired Ending Q 700 800 900 1,000 Less: Beginning Inv 600 700 800 900 = Production Quantity 3,100 3,600 4,100 4,600 15,400 The 1Q from the next year is needed for the 4Q Desired Ending Inventory Calculation From Sales Budget Typically, the Desired Ending Inventory is a % of the next period’s sales; e.g., 1Q 20% x 2Q Sales of 3,500 = 700 The Beginning Inventory for a quarter = the Ending Inventory from the previous quarter Balance Sheet
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ACC 204 Chapter 9 4 Direct Materials Budget From Production Budget 1 Q 2 Q 3 Q 4 Q Year Next Yr 1Q Units to be Produced 3,100 3,600 4,100 4,600 x Direct Material per Unit
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This note was uploaded on 04/21/2010 for the course ACCT 621 taught by Professor Crotter during the Spring '10 term at UPenn.

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ACC 204 Quiz Prep Chapter 09 Handout - Dutchess Community...

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