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15 Cards in this Set

  • Front
  • Back
Advantages of Budgeting
1. Forces managers to plan
2. Improves decision making
3. Standard for performance evaluation
4. Better communication and coordination
Master Budget
financial plan for the organization as a whole
Continuous Budget
moving 12 month budget
Operating Budget
Describe the income generating activities of a firm: sales, production, finished goods inventory; prepared first
Financial Budgets
Detail the cash inflows and outflows and overall financial position
Preparing the Operating Budget
(S, P, DM, DL, OH, S&A, EI, COGS)
1. Sales
2. Production
3. Direct materials
4. Direct labor
5. Overhead
6. Selling and administrative
7. Ending inventory
8. COGS
Sales Budget
Units x selling price = budgeted sales
Production Budget
Units to be produced= Expected unit sales + units in ending inventory - units in beginning inventory
Direct materials purchases budget
Purchases = DM needed for production + desired DM in ending inventory - DM in beginning inventory
Direct labor budget
Units to be produced x DL time per unit = total hours needed x average wage per hour = total DL cost
Overhead budget
budgeted DL hours x variable OH rate = budgeted variable OH = budgeted fixed OH (includes depreciation) = Total OH
Ending Finished Goods Inventory Budget
Units x unit cost
Unit Cost
= DM/unit + DL/unit
Overhead
Variable (DL/unit x Var. OH rate) + Fixed (DL/unit x (Budg. Fix. OH / Budg. DL hours)
COGS Budget
DM used + DL used + OH = Budg. Manufacturing Costs + Beg. Finished Goods = Goods available for sale - End finished goods = Budg COGS