3highly achievable budget targets are usually

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Unformatted text preview: achievable budget targets are usually preferred when managers are rewarded based on meeting budget targets. 7-11 The Master Budget: An Overview Sales budget Sales budget Ending inventory Ending inventory budget budget Direct materials Direct materials budget budget Production budget Production budget Direct labor Direct labor budget budget Selling and Selling and administrative administrative budget budget Manufacturing Manufacturing overhead budget overhead budget Cash budget Cash budget Budgeted Budgeted income income statement statement Budgeted Budgeted balance sheet balance sheet 7-12 Learning Objective 2 Prepare a sales budget, including a schedule of expected cash collections. 7-13 Budgeting Example Royal Company is preparing budgets for the quarter ending June 30th. Budgeted sales for the next five months are: April May June July August 20,000 units 50,000 units 30,000 units 25,000 units 15,000 units The selling price is $10 per unit. 7-14 The Sales Budget The individual months of April, May, and June are summed to obtain the total budgeted sales in units and dollars for the quarter ended June 30th 7-15 Expected Cash Collections • All sales are on account. • Royal’s collection pattern is: 70% collected in the month of sale, 25% collected in the month following sale, 5% uncollectible. • In April, the March 31st accounts receivable balance of $30,000 will be collected in full. 7-16 Expected Cash Collections 7-17 Expected Cash Collections From the Sales Budget for April. From the Sales Budget for April. 7-18 Expected Cash Collections From the Sales Budget for May. From the Sales Budget for May. 7-19 Quick Check What will be the total cash collections for the quarter? a. $700,000 b. $220,000 c. $190,000 d. $905,000 7-20 Quick Check What will be the total cash collections for the quarter? a. $700,000 b. $220,000 c. $190,000 d. $905,000 7-21 Expected Cash Collections 7-22 Learning Objective 3 Prepare a production budget. 7-23 The Production Budget Sales Sale...
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This document was uploaded on 03/23/2014.

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