8. Budgeting

1,184 views
946 views

Published on

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,184
On SlideShare
0
From Embeds
0
Number of Embeds
529
Actions
Shares
0
Downloads
20
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

8. Budgeting

  1. 1. Universidad Cuauhtémoc Campus Aguascalientes Budgeting Análisis de Costos Maestría en Administración
  2. 2. Housing 30% Utilities 5% Food 20%Medical 5% Other 4% Clothing 7% Transportation 15% Entertainment 6% Savings 8% Estimated portion of your total monthly income that should be budgeted Nature and Objectives of Budgeting
  3. 3. Establishing specific goals Executing plans to achieve the goals Periodically comparing actual results to the goals Objectives of Budgeting PLANNING DIRECTING CONTROLLING Nature and Objectives of Budgeting
  4. 4. Continuous Budgeting One-Year Budget Feb. 2006 Mar. 2006 Apr. 2006 May 2006 June 2006 July 2006 Aug. 2006 Sep. 2006 Oct. 2006 Nov. 2006 Dec. 2006 Jan. 2007 Delete on February 2007
  5. 5. Continuous Budgeting One-Year Budget Add February 2007 Mar. 2006 Apr. 2006 May 2006 June 2006 July 2006 Aug. 2006 Sep. 2006 Oct. 2006 Nov. 2006 Dec. 2006 Jan. 2007 Feb. 2007
  6. 6. Static Budgets Description: A budget that does not reflect potential changes in volume or activity level Strength: It is simple—all expenses are budgeted as fixed costs Weakness: It does not reflect changes in revenues and expenses that occur as volumes change Typical usage: Service organizations or administrative departments of retailers and manufacturers
  7. 7. Colter Manufacturing Company Assembly Department Budget For the Month Ending July 31, 2006 Direct labor $40,000 Electric Power 5,000 Supervisor salaries 15,000 Total department costs $60,000 Static Budgets
  8. 8. Flexible Budgets Description: A budget that shows revenues and expenses for a variety of volumes or activity levels Strength: Provides information needed to analyze the impact of volume changes on actual operating results Weakness: Requires greater research into costs—must differentiate fixed and variable costs Typical usage: Operational departments of retailers and manufacturers whose costs change with sales and production
  9. 9. Colter Manufacturing Company Assembly Department Budget For the Month Ending July 31, 2006 Units of production 8,000 9,000 10,000 Variable cost: Direct labor $40,000 $45,000 $50,000 Electric power 4,000 4,500 5,000 Total variable cost $44,000 $49,500 $55,000 Cost per unit is $5.50 at all levels of activity
  10. 10. Variable cost: Direct labor $40,000 $45,000 $50,000 Electric power 4,000 4,500 5,000 Total variable cost $44,000 $49,500 $55,000 Fixed cost: Electric power $ 1,000 $ 1,000 $ 1,000 Supervisor salaries 15,000 15,000 15,000 Total fixed cost $16,000 $16,000 $16,000 Units of production 8,000 9,000 10,000 Colter Manufacturing Company Assembly Department Budget For the Month Ending July 31, 2006
  11. 11. Units of production 8,000 9,000 10,000 Variable cost: Direct labor $40,000 $45,000 $50,000 Electric power 4,000 4,500 5,000 Total variable cost $44,000 $49,500 $55,000 Fixed cost: Electric power $ 1,000 $ 1,000 $ 1,000 Supervisor salaries 15,000 15,000 15,000 Total fixed cost $16,000 $16,000 $16,000 Total department costs $60,000 $65,500 $71,000 Colter Manufacturing Company Assembly Department Budget For the Month Ending July 31, 2006
  12. 12. Static Budgets Budget Overbudget $60,000 $72,000
  13. 13. 8,000 units $60,000 $72,000 9,000 units $65,500 10,000 units $71,000 Overbudget Flexible Budget Flexible Budgets
  14. 14. Master Budget Budgeted Income Statement Sales budget Cost of goods sold budget: Production budget Direct materials purchases budget Direct labor cost budget Selling and administrative expense budget
  15. 15. Elite Accessories Budgets
  16. 16. Sales Budget Production Budget Expected units of sales + Desired units in ending inventory – Estimated units in beginning inventory Total units to be produced
  17. 17. Production Budget Direct Materials Purchases Budget Materials needed for production + Desired ending materials inventory –Est. beginning materials inventory Direct materials to be purchased Sales Budget
  18. 18. Production Budget Direct Materials Purchases Budget Direct Labor Cost Budget Factory Overhead Cost Budget Cost of Goods Sold Budget Selling & Administrative Expenses Budget Sales Budget
  19. 19. Elite Accessories Inc. Sales Budget For the Year Ending December 31, 2010 Wallet: East……………….. 287,000 $12.00 $ 3,444,000 West………………. 241,000 12.00 2,892,000 Total……………. 528,000 $ 6,336,000 Handbag: East……………….. 156,400 $25.00 $ 3,910,000 West………………. 123,600 25.00 3,090,000 Total……………. 280,000 $ 7,000,000 Total revenue from Sales……………….. $13,336,000 Unit Sales Unit Selling Total Product and Region Volume Price Sales
  20. 20. Elite Accessories Inc. Production Budget For the Year Ending December 31, 2010 Expected units to be sold 528,000 280,000 From sales budget Units Wallet Handbag
  21. 21. Elite Accessories Inc. Production Budget For the Year Ending December 31, 2010 Expected units to be sold…………. 528,000 280,000 Plus desired ending inventory, December 31, 2010……………. 80,000 60,000 Total 608,000 340,000 Units Wallet Handbag
  22. 22. Elite Accessories Inc. Production Budget For the Year Ending December 31, 2010 Expected units to be sold…………. 528,000 280,000 Plus desired ending inventory, December 31, 2010……………. 80,000 60,000 Total………………………………. 608,000 340,000 Less estimated beginning inventory, January 1, 2010…………………. 88,000 48,000 Total units to be produced………… 520,000 292,000 Units Wallet Handbag
  23. 23. Elite Accessories Inc. Direct Materials Purchases Budget For the Year Ending December 31, 2010 Direct Materials Leather Lining Total Square yards required for production: Wallet (Note A)………………….. 156,000 52,000 Note A: Leather: 520,000 units x 0.30 sq. yd. per unit = 156,000 sq. yds. Lining: 520,000 units x 0.10 sq. yd. Per unit = 52,000 sq. yds.
  24. 24. Square yards required for production: Wallet (Note A)……..……..…….. 156,000 52,000 Handbag (Note B)……………….. 365,000 146,000 Note B: Leather: 292,000 units x 1.25 sq. yd. per unit = 365,000 sq. yds. Lining: 292,000 units x 0.50 sq. yd. Per unit = 146,000 sq. yds. Direct Materials Leather Lining Total Elite Accessories Inc. Direct Materials Purchases Budget For the Year Ending December 31, 2010
  25. 25. Square yards required for production: Wallet (Note A)……....………….. 156,000 52,000 Handbag (Note B).………………. 365,000 146,000 Plus desired inventory, Dec. 31, 2010 20,000 12,000 Total……………………………… 541,000 210,000 Direct Materials Leather Lining Total Elite Accessories Inc. Direct Materials Purchases Budget For the Year Ending December 31, 2010
  26. 26. Square yards required for production: Wallet (Note A) …………………. 156,000 52,000 Handbag (Note B) ………………. 365,000 146,000 Plus desired inventory, Dec. 31, 2010 20,000 12,000 Total……………………………… 541,000 210,000 Less estimated inventory, Jan. 1, 2010 18,000 15,000 Total square yards to be produced.. 523,000 195,000 Direct Materials Leather Lining Total Elite Accessories Inc. Direct Materials Purchases Budget For the Year Ending December 31, 2010
  27. 27. Square yards required for production: Wallet (Note A)………………….. 156,000 52,000 Handbag (Note B).………………. 365,000 146,000 Plus desired inventory, Dec. 31, 2010 20,000 12,000 Total……………………………… 541,000 210,000 Less estimated inventory, Jan. 1, 2010 18,000 15,000 Total square yards to be produced.. 523,000 195,000 Unit price (per square yard)…………. x $4.50 x $1.20 Total direct materials to be purchased. $2,353,500 $234,000 $2,587,500 Direct Materials Leather Lining Total Elite Accessories Inc. Direct Materials Purchases Budget For the Year Ending December 31, 2010
  28. 28. Elite Accessories Inc. Direct Labor Cost Budget For the Year Ending December 31, 2010 Cutting Sewing Total Note A: Cutting Department: 520,000 units x 0.10 hr. per unit = 52,000 hrs. Sewing Department: 520,000 units x 0.25 hr. per unit = 130,000 hrs. Hours required for production: Wallet (Note A)…………. 52,000 130,000
  29. 29. Cutting Sewing Total Note A: Cutting Department: 520,000 units x 0.10 hr. per unit = 52,000 hrs. Sewing Department: 520,000 units x 0.25 hr. per unit = 130,000 hrs. Hours required for production: Wallet (Note A)…………. 52,000 130,000 Handbag (Note B)……….. 43,800 116,800 . Note B: Cutting Department: 292,000 units x 0.15 hr. per unit = 43,800 hrs. Sewing Department: 292,000 units x 0.40 hr. per unit = 116,800 hrs Elite Accessories Inc. Direct Labor Cost Budget For the Year Ending December 31, 2010
  30. 30. Cutting Sewing Total Hours required for production: Wallet (Note A)…………. 52,000 130,000 Handbag (Note B)……….. 43,800 116,800 Total……………………... 95,800 246,800 Note A: Cutting Department: 520,000 units x 0.10 hr. per unit = 52,000 hrs. Sewing Department: 520,000 units x 0.25 hr. per unit = 130,000 hrs.. Note B: Cutting Department: 520,000 units x 0.15 hr. per unit = 43,800 hrs. Sewing Department: 520,000 units x 0.40 hr. per unit = 116,800 hrs Elite Accessories Inc. Direct Labor Cost Budget For the Year Ending December 31, 2010
  31. 31. Cutting Sewing Total Hours required for production: Wallet (Note A)…………. 52,000 130,000 Handbag (Note B)……….. 43,800 116,800 Total……………………... 95,800 246,800 Hourly rate…………………… x $12.00 x $15.00 Total direct labor cost………… $1,149,600 $3,702,000 $4,851,600 Note A: Cutting Department: 520,000 units x 0.10 hr. per unit = 52,000 hrs. Sewing Department: 520,000 units x 0.25 hr. per unit = 130,000 hrs. Note B: Cutting Department: 520,000 units x 0.15 hr. per unit = 43,800 hrs. Sewing Department: 520,000 units x 0.40 hr. per unit = 116,800 hrs Elite Accessories Inc. Direct Labor Cost Budget For the Year Ending December 31, 2010
  32. 32. Elite Accessories Inc. Factory Overhead Cost Budget For the Year Ending December 31, 2010 Indirect factory wages……………………... $ 732,800 Supervisory salaries………………………... 360,000 Power and light…………………………….. 306,000 Depreciation of plant and equipment………. 288,000 Indirect materials…………………………… 182,800 Maintenance………………………………... 140,280 Insurance and property taxes………………. 79,200 Total factory overhead cost………………... $2,089,080
  33. 33. Elite Accessories Inc. Cost of Goods Sold Budget For the Year Ending December 31, 2010 Note A: Leather: 18,000 sq. yds. x $4.50 per sq. yd $81,000 Lining: 15,000 sq. yds. x $1.20 per sq. yd 18,000 Direct materials inventory, January 1, 2010 $99,000 Finished goods inventory, January 1 ,2010….. $ 1,095,600 Work in process inventory, January 1, 2010… $ 214,400 Direct materials: Direct materials inventory, January 1, 2010 (Note A)…………………………………. $ 99,000
  34. 34. Finished goods inventory, January 1 ,2010…. $ 1,095,600 Work in process inventory, January 1, 2010... $ 214,400 Direct materials: Direct materials inventory, January 1, 2010 (Note A)…………………………………. $ 99,000 Direct materials purchases (Slide 27)…….. 2,587,500 Cost of direct materials available for use…. $2,686,500 Less direct materials inventory, December 31, 2010 (Note B)……………. 104,400 Elite Accessories Inc. Cost of Goods Sold Budget For the Year Ending December 31, 2010 Note B: Leather: 20,000 sq. yds. x $4.50 per sq. yd $ 90,000 Lining: 12,000 sq. yds. x $1.20 per sq. yd 14,400 Direct materials inventory, December 31, 2010 $104,400
  35. 35. Finished goods inventory, January 1 ,2010…. $ 1,095,600 Work in process inventory, January 1, 2010... $ 214,400 Direct materials: Direct materials inventory, January 1, 2010 (Note A)…………………………………. $ 99,000 Direct materials purchases (Slide 27)…….. 2,587,500 Cost of direct materials available for use…. $2,686,500 Less direct materials inventory, December 31, 2010 (Note B)……………. 104,400 Cost of direct materials placed in production $2,582,100 Direct labor (Slide 31)………………………. 4,851,600 Factory overhead (Slide 32)………………….. 2,089,080 Total manufacturing costs……………………. 9,522,780 Total work in process during period…………. $9,737,180 Elite Accessories Inc. Cost of Goods Sold Budget For the Year Ending December 31, 2010
  36. 36. Less work in process inventory, December 31, 2010 220,000 Cost of goods manufactured………………………... 9,517,180 Cost of finished goods available for sale…………... $10,612,780 Less finished goods inventory, December 31, 2010.. 1,565,000 Cost of goods sold………………………………….. $ 9,047,780 Finished goods inventory, January 1 ,2010………... $ 1,095,600 Work in process inventory, January 1, 2010……….. $ 214,500 Total manufacturing costs………………………….. 9,522,780 Total work in process during period……………….. $9,737,180 Elite Accessories Inc. Cost of Goods Sold Budget For the Year Ending December 31, 2010
  37. 37. Elite Accessories Inc. Selling and Administrative Expenses Budget For the Year Ending December 31, 2010 Selling expenses: Sales salaries expense…………………………. $715,000 Advertising expense…………………………... 360,000 Travel expense…………………………………. 115,000 Total selling expenses………………………... $1,190,000 Administrative expenses: Officers’ salaries expense………………………. $360,000 Office salaries expense…………………………. 258,000 Office rent expense……………………………... 34,500 Office supplies expense…………………………. 17,500 Miscellaneous administrative expense………….. 25,000 Total administrative expenses………………… 695,000 Total selling and administrative expenses………… $1,885,000
  38. 38. Revenue from sales (slide 19) $13,336,000 Cost of goods sold (slide 36) 9,047,780 Gross profit $ 4,288,220 Selling & administrative expenses: Selling expenses (slide 37) $1,190,000 Administrative expenses (slide 37) 695,000 Total sell. & Admin. Expenses 1,885,000 Income from operations $ 2,403,220 Other income: Interest revenue $ 98,000 Other expense: Interest expense 90,000 8,000 Income before income tax $ 2,411,220 Income tax 600,000 Net income $ 1,811,220 Elite Accessories Inc. Budgeted Income Statement For the Year Ending December 31, 2010
  39. 39. Universidad Cuauhtémoc Campus Aguascalientes Análisis de Costos Maestría en Administración

×