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Profit Planning, Activity-Based Budgeting and e-Budgeting 9 Chapter Nine
Purposes of Budgeting Systems ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Activity-Based Costing versus Activity-Based Budgeting Resources Cost objects: products and services produced, and customers served. Activities Resources Forecast of products and services to be produced and customers served. Activities Activity-Based Costing (ABC) Activity-Based Budgeting (ABB)
Types of Budgets Detail Budget Detail Budget Detail Budget Master Budget Covering all phases of a company’s operations. Sales Production Materials
Types of Budgets 1999 2000 2001 2002 Continuous or  Rolling Budget This budget is usually a twelve-month  budget that rolls forward one month  as the current month is completed. L o n g  R a n g e  B u d g e t s Capital budgets with acquisitions  that normally cover several years.
Direct Materials Budget Sales of Services or Goods Ending Inventory Budget Work in Process and Finished Goods Production Budget Selling and Administrative Budget Direct Labor Budget Overhead Budget Ending Inventory Budget Direct Materials
Budgeted Financial Statements Direct Materials Budget Cash Budget Sales of Services or Goods Ending Inventory Budget Work in Process and Finished Goods Production Budget Selling and Administrative Budget Direct Labor Budget Overhead Budget Ending Inventory Budget Direct Materials Exh.  9-1
Sales Budget ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Sales Budget
Production Budget Completed Production must be adequate to meet budgeted sales and provide for sufficient ending inventory. Sales  Budget Production Budget
Production Budget ,[object Object],[object Object],[object Object]
Production Budget From sales budget
Production Budget
Production Budget March 31 ending inventory
Production Budget
Production Budget
Direct-Material Budget ,[object Object],[object Object],[object Object],[object Object]
Direct-Material Budget From our production budget
Direct-Material Budget 10% of the following  month’s production
Direct-Material Budget March 31  inventory
Direct-Material Budget
Direct-Material Budget
Direct-Labor Budget ,[object Object],[object Object],[object Object],[object Object],[object Object]
Direct-Labor Budget From our production budget
Direct-Labor Budget
Direct-Labor Budget This is the greater of labor hours required or labor hours guaranteed.
Direct-Labor Budget
Overhead Budget ,[object Object]
Selling and Administrative Expense Budget ,[object Object],[object Object],[object Object]
Selling and Administrative Expense Budget From our Sales budget
Selling and Administrative Expense Budget
Selling and Administrative Expense Budget
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Cash Receipts Budget
Cash Receipts Budget
Cash Receipts Budget
Cash Disbursement Budget ,[object Object],[object Object],[object Object],[object Object]
Cash Disbursement Budget 140,000 lbs. × $.40/lb. = $56,000
Cash Disbursement Budget
Cash Disbursement Budget Continued ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Cash Disbursement Budget Continued From our Cash Receipts Budget
Cash Disbursement Budget Continued From our Cash Disbursements Budget
Cash Disbursement Budget Continued From our Direct Labor Budget
Cash Disbursement Budget Continued From our Overhead Budget
Cash Disbursement Budget Continued From our Selling and Administrative Expense Budget
Cash Disbursement Budget Continued To maintain a cash balance of $30,000, Breakers must borrow $35,000 on its line of credit.
Cash Disbursement Budget Financing and Repayment Ending cash balance for April is the beginning May balance.
Cash Disbursement Budget Continued Breakers must borrow an addition $13,800 to maintain a cash balance of $30,000.
Cash Disbursement Budget Financing and Repayment
Cash Disbursement Budget Continued At the end of June, Breakers has enough cash to repay the $48,800 loan plus interest at 12%.
Cash Disbursement Budget Financing and Repayment
Cash Disbursement Budget Continued
Cash Disbursement Budget Financing and Repayment
Budgeted Income Statement Completed After we complete the cash budget, we can prepare the budgeted income statement for Breakers. Cash  Budget Budgeted Income Statement
Budgeted Ending Inventory * rounded Manufacturing overhead is applied on the basis of direct labor hours. Total overhead  $191,000  Total labor hours  10,600 hrs. = $18.02 per hr. *
Budgeted Income Statement
Budgeted Balance Sheet ,[object Object],[object Object],[object Object],[object Object],[object Object]
25%of June sales of  $300,000 11,500 lbs. at $.40 per lb. 5,000 units at $4.60 per unit.
50% of June purchases  of $56,800
Budget Administration ,[object Object],[object Object],[object Object]
E-Budgeting ,[object Object]
Firewalls and Information Security ,[object Object]
Zero-Base Budgeting ,[object Object]
International Aspects of Budgeting ,[object Object],[object Object],[object Object],[object Object]
Budgeting Product Life-Cycle Costs Product planning and concept Design. Preliminary design. Detailed design and testing. Production. Distribution and customer service.
Behavioral Impact of Budgets ,[object Object],[object Object]
Participative Budgeting Flow of Budget Data
End of Chapter 9

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Profit Planning, Activity-Based Budgeting and e-Budgeting