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Ch 9 - Budgeting

Ch 9 - Budgeting - Budgeting Chapter 9 – additional HOW...

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Unformatted text preview: Budgeting Chapter 9 – additional HOW TO Prepare a Sales Budget Information: Budgeted units to be sold for each quarter: 1,000, 1,200, 1,500, and 2,000. Selling price is $10 per t-shirt. Prepare a sales budget for each quarter and for the year. 4 Unit selling price 1,000 Quarter Sales Budget Units 1 Year 5,700 x $10 Budgeted sales Texas Rex, Inc. For the Year Ended December 31, 2010 2 3 4 1,200 1,500 2,000 x $10 x $10 x $10 x $10 $10,000 $12,000 $15,000 $20,000 $57,000 5 HOW TO Prepare the Production Budget 6 Production Budget Describes how many units must be produced in order to meet sales needs and satisfy ending inventory requirements Formula: Units to be produced = Expected unit sales Units in ending inventory +- Units in beginning inventory 7 Example • Sales budget ◦ 1 st Quarter = 1,000 units ◦ 2 nd Quarter = 1,200 units ◦ 3 rd Quarter = 1,500 units ◦ 4 th Quarter = 2,000 units • Beginning inventory is 180 t-shirts • Ending inventory ◦ Desired quantity = 20% of the following quarter’s sales ◦ Sales estimate for first quarter of 2011 = 1,000 units Information: 8 Prepare a production budget for each quarter and for the year. 9 1,000 Quarter Production Budget Sales 1 Texas Rex, Inc. For the Year Ended December 31, 2010 2 1,200 1,500 3 2,000 4 Year 5,700 10 Desired ending inv. 1,000 Quarter Production Budget Sales 1 Units to be produced Texas Rex, Inc. For the Year Ended December 31, 2010 2 1,200 1,500 (240) (300) 1,060 1,260 1,600 3 Total needs Less: Beg. inventory 240 300 400 1,240 1,500 1,900 (180) 2,000 4 1,800 200 2,200 (400) Year 5,700 (180) 5,720 200 5,900 11 HOW TO Prepare a Direct Materials Purchases Budget 12 Direct Materials Purchases Budget Tells the amount and cost of raw materials to be purchased in each time period. Formula: Direct Materials to be purchased Direct materials needed for production + Desired direct materials in ending inventory- Direct materials in beginning inventory 13 Example • Production budget ◦ Units to be produced: ∙ 1 st Quarter = 1,060 units ∙ 2 nd Quarter = 1,260 units ∙ 3 rd Quarter = 1,600 units ∙ 4 th Quarter = 1,800 units ∙ Total for the year = 5,720 units • Per-unit basis ◦ One plain t-shirt, $3 each ◦ Five ounces of ink, $0.20 per ounce Information: 14 Example • Beginning inventory ◦ 58 plain t-shirts and 390 ounces of ink • Ending inventory ◦ 10% of the following quarter’s production ◦ Desired ending inventory is 106 t-shirts and 530 ounces of ink Information continued: 15 Prepare a direct materials purchases budget for: ◦ Plain t-shirts ◦ Ink 16 1,060 Quarter Direct Materials Purchases Budget Units to be produced 1 Texas Rex, Inc. For the Year Ended December 31, 2010 2 1,260 1,600 3 Plain T-Shirts 1,800 4 Year 5,720 17 1,060 Quarter Direct Materials Purchases Budget Units to be produced 1 Texas Rex, Inc....
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Ch 9 - Budgeting - Budgeting Chapter 9 – additional HOW...

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