Profit Planning

Сентябрь 5, 2022

Содержание

2. Planning and Control Planning -- involves developing objectives and preparing various budgets to achieve these objectives.
3. Advantages of Budgeting Advantages
4. Responsibility Accounting Managers should be held responsible for those items — and only those items —
5. Choosing the Budget Period Operating Budget 1999 2000 2001 2002 The annual operating budget may be
6. Participative Budget System Flow of Budget Data
7. The Budget Committee A standing committee responsible for overall policy matters relating to the budget coordinating
8. The Master Budget Budgeted Financial Statements
9. The Sales Budget Detailed schedule showing expected sales for the coming periods expressed in units and
10. Budgeting Example Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for
11. The Sales Budget
12. The Sales Budget
13. The Production Budget Production must be adequate to meet budgeted sales and provide for sufficient ending
14. The Production Budget Royal Company wants ending inventory to be equal to 20% of the following
15. The Production Budget
16. The Production Budget
17. Quick Check ✔ What is the required production for May? a. 56,000 units b. 46,000 units
18. Quick Check ✔ What is the required production for May? a. 56,000 units b. 46,000 units
19. The Production Budget
20. The Production Budget
21. The Production Budget Assumed
22. Expected Cash Collections All sales are on account. Royal’s collection pattern is: 70% collected in the
23. Expected Cash Collections
24. Expected Cash Collections
25. Quick Check ✔ What will be the total cash collections for the quarter? a. $700,000 b.
26. Quick Check ✔ What will be the total cash collections for the quarter? a. $700,000 b.
27. Expected Cash Collections
28. Expected Cash Collections
29. The Direct Materials Budget At Royal Company, five pounds of material are required per unit of
30. The Direct Materials Budget
31. The Direct Materials Budget
32. The Direct Materials Budget
33. The Direct Materials Budget March 31 inventory
34. Quick Check ✔ How much materials should be purchased in May? a. 221,500 pounds b. 240,000
35. Quick Check ✔ How much materials should be purchased in May? a. 221,500 pounds b. 240,000
36. The Direct Materials Budget Assumed
37. Expected Cash Disbursement for Materials Royal pays $0.40 per pound for its materials. One-half of a
38. Expected Cash Disbursement for Materials
39. Expected Cash Disbursement for Materials
40. Quick Check ✔ What are the total cash disbursements for the quarter? a. $185,000 b. $
41. Quick Check ✔ What are the total cash disbursements for the quarter? a. $185,000 b. $
42. Expected Cash Disbursement for Materials
43. Expected Cash Disbursement for Materials
44. The Direct Labor Budget At Royal, each unit of product requires 0.05 hours of direct labor.
45. The Direct Labor Budget
46. The Direct Labor Budget
47. The Direct Labor Budget
48. The Direct Labor Budget
49. Quick Check ✔ What would be the total direct labor cost for the quarter if the
50. Quick Check ✔ What would be the total direct labor cost for the quarter if the
51. Manufacturing Overhead Budget Royal Company uses a variable manufacturing overhead rate of $1 per unit produced.
52. Manufacturing Overhead Budget
53. Manufacturing Overhead Budget
54. Manufacturing Overhead Budget
55. Ending Finished Goods Inventory Budget Now, Royal can complete the ending finished goods inventory budget. At
56. Ending Finished Goods Inventory Budget
57. Ending Finished Goods Inventory Budget
58. Ending Finished Goods Inventory Budget
59. Quick Check ✔ What is the value of the ending finished goods inventory? a. $ 9,980
60. Quick Check ✔ What is the value of the ending finished goods inventory? a. $ 9,980
61. Ending Finished Goods Inventory Budget
62. Selling and Administrative Expense Budget At Royal, variable selling and administrative expenses are $0.50 per unit
63. Selling and Administrative Expense Budget
64. Quick Check ✔ What are the total cash disbursements for selling and administrative expenses for the
65. Quick Check ✔ What are the total cash disbursements for selling and administrative expenses for the
66. Selling and Administrative Expense Budget
67. The Cash Budget Royal: Maintains a 16% open line of credit for $75,000. Maintains a minimum
68. The Cash Budget
69. The Cash Budget
70. The Cash Budget
71. Financing and Repayment
72. The Cash Budget
73. Financing and Repayment Because the ending cash balance is exactly $30,000, Royal will not repay the
74. Quick Check ✔ What is the excess (deficiency) of cash available over disbursements for June? a.
75. Quick Check ✔ What is the excess (deficiency) of cash available over disbursements for June? a.
76. The Cash Budget
77. The Cash Budget At the end of June, Royal has enough cash to repay the $50,000
78. Financing and Repayment
79. The Budgeted Income Statement After we complete the cash budget, we can prepare the budgeted income
80. The Budgeted Income Statement
81. The Budgeted Balance Sheet Royal reported the following account balances prior to preparing its budgeted financial
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Planning and Control
Planning -- involves developing objectives and preparing various budgets

to achieve these objectives.

Control -- involves the steps taken by management that attempt to ensure the objectives are attained.

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Advantages of Budgeting
Advantages

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Responsibility Accounting
Managers should be held responsible for those items —

and only those items — that the manager can actually control to a significant extent.

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Choosing the Budget Period
Operating Budget
1999
2000
2001
2002
The annual operating budget
may be divided

into quarterly
or monthly budgets.

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Participative Budget System
Flow of Budget Data

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The Budget Committee
A standing committee responsible for
overall policy matters relating

to the budget
coordinating the preparation of the budget

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The Master Budget
Budgeted Financial Statements

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The Sales Budget
Detailed schedule showing expected sales for the coming

periods expressed in units and dollars.

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Budgeting Example
Royal Company is preparing budgets for the quarter ending June

30.
Budgeted sales for the next five months are:
April 20,000 units
May 50,000 units
June 30,000 units
July 25,000 units
August 15,000 units.
The selling price is $10 per unit.

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The Sales Budget

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The Sales Budget

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The Production Budget
Production must be adequate to meet budgeted
sales and provide

for sufficient ending inventory.

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The Production Budget
Royal Company wants ending inventory to be equal to

20% of the following month’s budgeted sales in units.
On March 31, 4,000 units were on hand.
Let’s prepare the production budget.

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The Production Budget

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The Production Budget

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Quick Check ✔
What is the required production for May?
a.

56,000 units
b. 46,000 units
c. 62,000 units
d. 52,000 units

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Quick Check ✔
What is the required production for May?
a.

56,000 units
b. 46,000 units
c. 62,000 units
d. 52,000 units

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The Production Budget

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The Production Budget

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The Production Budget
Assumed

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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% is uncollectible.
The March 31 accounts receivable balance of $30,000 will be collected in full.

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Expected Cash Collections

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Expected Cash Collections

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Quick Check ✔
What will be the total cash collections for

the quarter?
a. $700,000
b. $220,000
c. $190,000
d. $905,000

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Quick Check ✔
What will be the total cash collections for

the quarter?
a. $700,000
b. $220,000
c. $190,000
d. $905,000

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Expected Cash Collections

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Expected Cash Collections

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The Direct Materials Budget
At Royal Company, five pounds of material are

required per unit of product.
Management wants materials on hand at the end of each month equal to 10% of the following month’s production.
On March 31, 13,000 pounds of material are on hand. Material cost is $0.40 per pound. Let’s prepare the direct materials budget.

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The Direct Materials Budget

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The Direct Materials Budget

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The Direct Materials Budget

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The Direct Materials Budget
March 31
inventory

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Quick Check ✔
How much materials should be purchased in May?

a. 221,500 pounds
b. 240,000 pounds
c. 230,000 pounds
d. 211,500 pounds

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Quick Check ✔
How much materials should be purchased in May?

a. 221,500 pounds
b. 240,000 pounds
c. 230,000 pounds
d. 211,500 pounds

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The Direct Materials Budget
Assumed

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Expected Cash Disbursement for Materials
Royal pays $0.40 per pound for its

materials.
One-half of a month’s purchases are paid for in the month of purchase; the other half is paid in the following month.
The March 31 accounts payable balance is $12,000.
Let’s calculate expected cash disbursements.

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Expected Cash Disbursement for Materials

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Expected Cash Disbursement for Materials

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Quick Check ✔
What are the total cash disbursements for the

quarter?
a. $185,000
b. $ 68,000
c. $ 56,000
d. $201,400

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Quick Check ✔
What are the total cash disbursements for the

quarter?
a. $185,000
b. $ 68,000
c. $ 56,000
d. $201,400

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Expected Cash Disbursement for Materials

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Expected Cash Disbursement for Materials

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The Direct Labor Budget
At Royal, each unit of product requires 0.05

hours of direct labor.
The Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week.
In exchange for the “no layoff” policy, workers agreed to a wage rate of $10 per hour regardless of the hours worked (No overtime pay).
For the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month.
Let’s prepare the direct labor budget.

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The Direct Labor Budget

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The Direct Labor Budget

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The Direct Labor Budget

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The Direct Labor Budget

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Quick Check ✔
What would be the total direct labor cost

for the quarter if the company follows its no lay-off policy, but pays $15 (time-and-a-half) for every hour worked in excess of 1,500 hours in a month?
a. $79,500
b. $64,500
c. $61,000
d. $57,000

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Quick Check ✔
What would be the total direct labor cost

for the quarter if the company follows its no lay-off policy, but pays $15 (time-and-a-half) for every hour worked in excess of 1,500 hours in a month?
a. $79,500
b. $64,500
c. $61,000
d. $57,000

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Manufacturing Overhead Budget
Royal Company uses a variable manufacturing overhead rate of

$1 per unit produced.
Fixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets).
Let’s prepare the manufacturing overhead budget.

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Manufacturing Overhead Budget

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Manufacturing Overhead Budget

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Manufacturing Overhead Budget

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Ending Finished Goods Inventory Budget
Now, Royal can complete the ending finished

goods inventory budget.
At Royal, manufacturing overhead is applied to units of product on the basis of direct labor hours.
Let’s calculate ending finished goods inventory.

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Ending Finished Goods Inventory Budget

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Ending Finished Goods Inventory Budget

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Ending Finished Goods Inventory Budget

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Quick Check ✔
What is the value of the ending finished

goods inventory?
a. $ 9,980
b. $24,950
c. $57,385
d. $49,900

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Quick Check ✔
What is the value of the ending finished

goods inventory?
a. $ 9,980
b. $24,950
c. $57,385
d. $49,900

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Ending Finished Goods Inventory Budget

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Selling and Administrative Expense Budget
At Royal, variable selling and administrative expenses

are $0.50 per unit sold.
Fixed selling and administrative expenses are $70,000 per month.
The fixed selling and administrative expenses include $10,000 in costs – primarily depreciation – that are not cash outflows of the current month.
Let’s prepare the company’s selling and administrative expense budget.

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Selling and Administrative Expense Budget

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Quick Check ✔
What are the total cash disbursements for selling

and administrative expenses for the quarter?
a. $180,000
b. $230,000
c. $110,000
d. $ 70,000

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Quick Check ✔
What are the total cash disbursements for selling

and administrative expenses for the quarter?
a. $180,000
b. $230,000
c. $110,000
d. $ 70,000

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Selling and Administrative Expense Budget

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The Cash Budget
Royal:
Maintains a 16% open line of credit for $75,000.
Maintains

a minimum cash balance of $30,000.
Borrows on the first day of the month and repays loans on the last day of the month.
Pays a cash dividend of $49,000 in April.
Purchases $143,700 of equipment in May and $48,300 in June paid in cash.
Has an April 1 cash balance of $40,000.

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