Professional Documents
Culture Documents
McGraw-Hill/Irwin
LO
1
Budgets
13 - 2
Goal congruence
Individual
goals
Participative budgeting:
Use of input from lower- and middle-management
employees; also called grass roots budgeting
13 - 3
Sales Forecasting
L.O. 3 Estimate sales.
Forecasting sales is the most difficult aspect of budgeting.
Sales staff
Market researchers
Delphi technique
Trend analysis
Econometric models
13 - 4
Forecasting Production
L.O. 4 Develop production and cost budgets.
A production budget is a plan of resources needed
to meet current sales demand and ensure that
inventory levels are sufficient for future sales.
Beginning balance
+
BB
Transfers in
TI
Units in beginning
+
inventory
Required
production
Transfers out
= Ending balance
TO
Budgeted
sales
Units in ending
inventory
13 - 5
Cash Budget
L.O. 5 Estimate cash flows.
The cash budget is a statement of cash on hand at
the start of the budget period, expected cash receipts,
expected cash disbursements, and the resulting cash
balance at the end of the budget period.
Cash receipts:
Collection of accounts receivable
Cash sales
Sales of assets
Borrowing
Issuing stock
Other
13 - 6
LO
5
Cash Budget
Cash disbursements:
Materials purchases
Manufacturing costs
Operating activities
Debt repayment
Acquisition of new assets
Income taxes
Dividends
Other activities
13 - 7
LO
5
Santiago Pants
Monthly Collection Experience
Sales on Credit
Cash collected from current month's sales
Cash collected from last month's sales
Cash discounts taken (percentage of gross sales)
Written off as bad debt
Total disposition of credit sales in current month
2
75
2
3
100%
LO
5
$540,000
100,000
$640,000
February
$375,000
90,000
$465,000
March
Total for
Quarter
$337,500
120,000
$457,500
$ 540,000
475,000
427,500
120,000
$1,562,500
13 - 9
LO
5
50%
48
2
100%
LO
5
$256,000
60,000
250,000
$566,000
February
$ 57,600
100,000
250,000
$407,600
March
Total for
Quarter
$ 96,000
125,000
250,000
$471,000
$ 256,000
117,600
196,000
125,000
750,000
$1,444,600
13 - 11
Assets
Current assets:
Cash
Accounts receivable
Inventories
Other current assets
Total current assets
Long-term assets:
Property, plant, equipment
Less: Accumulated depreciation
Total assets
Balance
Jan 1
Additions Subtractions
Balance
Dec 31
$ 830
540
155
161
$1,686
$ 6,940
7,200
4,265
-0$18,405
$ 7,399
6,840
3,995
100
$18,334
$ 371
900
425
61
$1,757
1,866
(1,246)
$2,306
1,470
-0(220)
-0$19,651 $18,334
3,336
(1,470)
$3,623
13 - 12
LO
6
Additions Subtractions
Balance
Dec 31
$ 256
187
23
$ 466
258
$ 724
$1,715
550
23
$2,288
-0$2,288
$1,694
350
23
$2,067
23
$2,090
$ 277
387
23
$ 687
235
$ 922
$ 437
1,145
$1,582
$2,306
$ -01,149
$1,149
$3,437
$ -030
30
$2,120
$ 437
2,264
$2,701
$3,623
13 - 13
Budgeted cost
of services
Budgeted
income
statement
Cash budget
Marketing and
administrative
cost budget
Budgeted
balance sheets
13 - 14
13 - 15
13 - 16
End of Chapter 13
McGraw-Hill/Irwin