MGMT_201_(Ganguly)_Lecture_20_post

MGMT_201_(Ganguly)_Lecture_20_post - MGMT 201 (Ganguly)...

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Unformatted text preview: MGMT 201 (Ganguly) Lecture 20: Introduction to Budgets (Introduction To Chapter 9) Types of Budgets Detail Budget Production Detail Budget Materials Master Budget Covering all phases of a company’s operations. Detail Budget Sales Sales Budget –Breakers, Inc. is preparing budgets for the April April May May June June July July August August 20,000 units 50,000 units 30,000 units 25,000 units 15,000 units. quarter ending June 30. —Budgeted sales for the next five months are: ˜The selling price is $10 per unit. Sales Budget April Budgeted sales (units) 20,000 Selling price per unit $ 10 Total Revenue $200,000 May 50,000 $ 10 $ June 30,000 10 $ Quarter 100,000 10 $500,000 $300,000 $1,000,000 Production Budget Sales Sales Budget Budget Production Budget d te e pl om C Production must be adequate to meet budgeted sales and provide for sufficient ending inventory. Production Budget The management of Breakers, Inc. wants ending inventory to be equal to 20% of the following month’s budgeted sales in units. On March 31, 4,000 units were on hand. Let’s prepare the production Let’s prepare the production budget. Production Budget Sales in units Add: desired end. inventory Total needed Less: beg. inventory Units to be started April 20,000 May June Quarter From sales budget Production Budget Sales in units Add: desired end. inventory Total needed Less: beg. inventory Units to be started April 20,000 10,000 30,000 May June Quarter Production Budget Production Budget Sales in units Add: desired end. inventory Total needed Less: beg. inventory Units to be started April 20,000 10,000 30,000 4,000 26,000 May June Quarter March 31 ending inventory Production Budget Production Budget Sales in units Add: desired end. inventory Total needed Less: beg. inventory Units to be started April 20,000 10,000 30,000 4,000 26,000 May 50,000 6,000 56,000 10,000 46,000 June Quarter Production Budget Production Budget Sales in units Add: desired end. inventory Total needed Less: beg. inventory Units to be started April 20,000 10,000 30,000 4,000 26,000 May 50,000 6,000 56,000 10,000 46,000 June 30,000 5,000 35,000 6,000 29,000 Quarter 100,000 5,000 105,000 4,000 101,000 Direct­Material Budget At Breakers, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 10% of the following month’s production. on hand. Material cost $.40 per pound. On March 31, 13,000 pounds of material are Let’s prepare the direct materials budget. Let’s prepare the direct materials budget. Direct­Material Budget From our production budget Direct­Material Budget 10% of the following month’s production Direct­Material Budget March 31 inventory Direct­Material Budget Direct­Material Budget Direct­Material Budget July Production Sales in units Add: desired ending inventory Total units needed Less: beginning inventory Production in units 25,000 3,000 28,000 5,000 23,000 June Ending Inventory July production in units 23,000 Materials per unit 5 Total units needed 115,000 I nventory percentage 10% June desired ending inventory 11,500 Direct­Labor Budget At Breakers, each unit of product requires 0.1 hours of direct labor. The Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week. In exchange for the “no layoff” policy, workers agreed to a wage rate of $8 per hour regardless of the hours worked (No overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 3,000 hours per month. Let’s prepare the direct labor budget. Let’s prepare the directlabor budget. Direct­Labor Budget From our production budget Direct­Labor Budget Direct­Labor Budget This is the greater of labor hours required or labor hours guaranteed. Direct­Labor Budget Overhead Budget Here is Breakers’ Overhead Budget for the quarter. At Breakers, variable selling and Selling and Administrative Expense Budget administrative expenses are $0.50 per unit sold. are $70,000 per month. Fixed selling and administrative expenses The $70,000 fixed expenses include $10,000 in depreciation expense that does not require a cash outflows for the month. Selling and Administrative Expense Budget From our Sales budget Selling and Administrative Expense Budget Selling and Administrative Expense Budget More on Chapter 9 in the next class… Shhh! It’s getting close to exam time! ...
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This note was uploaded on 03/18/2011 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue.

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