This preview shows page 1. Sign up to view the full content.
Unformatted text preview: MGMT 201 (Ganguly) MGMT 201 (Ganguly)
Lecture 21: Budgets concluded (Chapter 9 completed) Overhead Budget
Here is Breakers’ Overhead Budget for the quarter. 2 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.
3 Selling and Administrative Expense Budget From our Sales budget 4 Selling and Administrative Expense Budget 5 Selling and Administrative Expense Budget 6 Cash Receipts Budget At Breakers, all sales are on account. The company’s collection pattern is: The March 31 accounts receivable 70% collected in the month of sale, 70% collected in the month of sale, 25% collected in the month following sale, 25% collected in the month following sale, 5% is uncollected. 5% is uncollected. balance of $30,000 will be collected in full.
7 Cash Receipts Budget 8 Cash Receipts Budget 9 Cash Disbursement Budget Breakers pays $0.40 per pound for its materials. Onehalf of a month’s purchases are paid for in the month of purchase; the other half is paid in the following month. No discounts are available. The March 31 accounts payable balance is $12,000. 10 10 Cash Disbursement Budget 140,000 lbs. × $.40/lb. = $56,000
11 11 Cash Disbursement Budget 12 12 Cash Disbursement Budget
Maintains a 12% open line of credit for $75,000. Maintains a minimum cash balance of $30,000. Borrows and repays loans on the last day of the month. Pays a cash dividend of $25,000 in April. Purchases $143,700 of equipment in May and $48,300 in June paid in cash. Has an April 1 cash balance of $40,000. 13 13 Cash Disbursement Budget
Continued From our Cash Receipts Budget 14 14 Cash Disbursement Budget
Continued From our Cash Disbursements Budget
15 15 Cash Disbursement Budget
Continued From our Direct Labor Budget
16 16 Cash Disbursement Budget
Continued From our Overhead Budget 17 17 Cash Disbursement Budget
Continued From our Selling and Administrative Expense Budget 18 18 Cash Disbursement Budget
Continued To maintain a cash balance of $30,000, Breakers must borrow $35,000 on its line of credit. 19 19 Cash Disbursement Budget
Financing and Repayment Ending cash balance for April is the beginning May balance. 20 20 Cash Disbursement Budget
Continued Breakers must borrow an additional $13,800 to maintain a cash balance of $30,000. 21 21 Cash Disbursement Budget
Financing and Repayment 22 22 Cash Disbursement Budget
At the end of June, Breakers has enough cash to repay the $48,800 loan plus interest at 12%. 23 23 Cash Disbursement Budget
Financing and Repayment 24 24 Cash Disbursement Budget
Continued 25 25 Cash Disbursement Budget
Financing and Repayment 26 26 Budgeted Income Statement
Cash Cash Budget Budget
p m Co d te le Budgeted Income Statement After we complete the cash budget, we can prepare the budgeted income statement for Breakers.
27 27 Budgeted Ending Inventory
Manufacturing overhead is applied on the basis of direct labor hours.
Production costs per unit Direct materials Direct labor Manufacturing overhead Quantity Cost 5.00 lbs. $ 0.40 0.10 hrs. $ 8.00 0.10 hrs. $18.02 $ Total 2.00 0.80 1.80 4.60 $ Budgeted finished goods inventory Ending inventory in units Unit product cost Ending finished goods inventory 5,000 $ 4.60 $23,000 Total overhead $191,000 = $18.02 per hr.* Total labor hours 10,600 hrs.
28 28 Budgeted Income Statement
Breakers, Inc. Budgeted Income Statement For the Three Months Ended June 30 Revenue (100,000 × $10) Cost of goods sold (100,000 × $4.60) Gross margin Operating expenses: Selling and admin. Expenses Interest expense Total operating expenses Net income $ 1,000,000 460,000 540,000 $ 260,000 838 $ 260,838 279,162 29 29 Budgeted Balance Sheet
Breakers reports the following account balances on June 30 prior to preparing its budgeted financial statements: Land $50,000 Building (net) $148,000 Common stock $200,000 Retained earnings $46,400 30 30 25%of June sales of $300,000 11,500 lbs. at $.40 per lb. 5,000 units at $4.60 per unit. 31 31 50% of June purchases purchases of $56,800 of 32 32 End of Chapter 9 The midterm exam is coming up…. You need to practice DOING a lot of HM and Self-Study problems without looking at the solutions! [Simply satisfying yourself that you “understand” the solutions will NOT be enough.]
33 33 ...
View Full Document
This note was uploaded on 03/18/2011 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue University-West Lafayette.
- Spring '08