Course Hero Logo

Chapter 8 - Handout.docx - Chapter 8 Budgeting I. Basic...

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 3 out of 9 pages.

Chapter 8BudgetingI.Basic Framework of BudgetingA.Responsibility Accounting – managers should only be held responsible for thoseitems they can actually control.B.Perpetual Budget – 12 month rolling budget.C.Self-Imposed Budget – participative budget, impacted individuals participate in thebudget process.D.Zero-Based Budgeting – all items must be justified each year not just the incrementalchange in the budget from last period.E.Budget Committee – usually responsible for developing objectives and coordinatingthe preparation of the budget.F.Master Budget – a summary of a company’s plans that set specific targets for sales,production, distribution, and financing activities.II.Preparing the Master BudgetA.Sales Budget– the starting point in preparing a master budget.B.Production Budget– prepared after the sales budget.Lists units produced during theperiod to meet the sales needed and provide for the desired ending inventory.C.Inventory Purchased– list the amount of inventory that needs to be purchased fromsuppliers during the period.D.Direct Materials - details raw materials that must be purchased to fulfill theproduction budget.E.Direct Labor – used to help plan employment needs to insure a labor force isavailable to meet budgeted production levels.F.Manufacturing Overhead – provides a schedule of all costs of production other thandirect materials and direct labor.G.Selling and Administrative Expenses - budgeted expenses other than manufacturingcosts.H.Cash Budget1.Receipts section2.Disbursement section3.Cash excess or deficiency section4.Financing sectionIII.Budgeted Financial Statements (Income Statement & Balance Sheet)1
Chapter 81.Tilson Company has projected sales and production in units for the second quarterof the coming year as follows:AprilMayJuneSales55,00045,00065,000Production 65,00055,00055,000All units are sold on account for $16 each. Cash collections from sales arebudgeted at 60% in the month of sale, 30% in the month following the month ofsale, and the remaining 10% in the second month following the month of sale.Accounts receivable on April 1 totaled $520,000 ($100,000 from February’s salesand the remainder from March).Cash-related production costs are budgeted at $7 per unit produced. Of theseproduction costs, 40% are paid in the month in which they are incurred and thebalance in the following month. Selling and administrative expenses will amountto $110,000 per month. The accounts payable balance on March 31 totals$193,000, which will be paid in April.Required:a.Prepare the Sales Budget for Tilson.b.Prepare a cash receipts budget for each month for Tilson Company.c.Prepare a schedule for each month showing budgeted cash disbursementsfor the Tilson Company.Answer:

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 9 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
MatthewMburu
Tags
1966, Budget Committee, Tilson Company

Newly uploaded documents

Show More

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture