acc220_appendix_c (2) - Axia College Material Appendix C...

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Axia College Material Appendix C Budgets Matrix Directions : Using the matrix, define each of the budgets listed and briefly describe its uses. Budget Definition Describe its uses Sales budget Is a budget which contains all of the sales prediction for the company in a month or yearly plan. is derived from the sales forecast. It represents management’s best estimate of sales revenue for the budget period. Helps to determine if sales predictions and goals are being met. If they are not being met to come up with a better plan of how the company can make these goals happen. Preparation of the sales budget is the starting point for the master budget. It sets the level of activity for other functions such as production and purchasing. Production budget This budget shows the units that must be produced to meet anticipated sales. A production budget is used to tell the company how well its production flow is going. Direct materials budget The direct materials budget shows both the quantity and cost of direct materials to be purchased. The quantities of direct materials are derived from the following formula. Schedule showing how much material will be required for production and how much material must be bought to meet this production requirement. The purchase depends on both expected usage of materials and inventory levels. For ACC 220
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example, assume expected production of 790 units, 3 lbs. Of material needed per
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acc220_appendix_c (2) - Axia College Material Appendix C...

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