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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
budget Direct materials
budget Production budget
Production budget Direct labor
budget Selling and
overhead budget Cash budget
7-12 Learning Objective 2
Prepare a sales budget,
including a schedule of
collections. 7-13 Budgeting Example Royal Company is preparing budgets for the
quarter ending June 30th. Budgeted sales for the next five months are:
August 20,000 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
d. $905,000 7-20 Quick Check What will be the total cash collections for
d. $905,000 7-21 Expected Cash Collections 7-22 Learning Objective 3 Prepare a production
budget. 7-23 The Production Budget
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This document was uploaded on 03/23/2014.
- Spring '14
- Managerial Accounting