TAILIEUCHUNG - Lecture Managerial accounting: Creating value in a dynamic business environment (9/e): Chapter 9 - Ronald W. Hilton
Chapter 9 - Profit planning and activity-based budgeting. After completing this chapter, you should be able to: List and explain five purposes of budgeting systems; describe the similarities and differences in the operational budgets prepared by manufacturers, service-industry firms, merchandisers, and nonprofit organizations; explain the concept of activity-based budgeting and the benefits it brings to the budgeting process;. | Chapter 9 Profit Planning and Activity-Based Budgeting Purposes of Budgeting Systems Budget a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time. Planning Facilitating Communication and Coordination Allocating Resources Controlling Profit and Operations Evaluating Performance and Providing Incentives Learning Objective 1 Types of Budgets Detail Budget Detail Budget Detail Budget Master Budget Covering all phases of a company’s operations. Sales Production Materials Budgeted Income Statement Cash Budget Sales of Services or Goods Ending Inventory Budget Work in Process and Finished Goods Production Budget Direct Materials Budget Selling and Administrative Budget Direct Labor Budget Overhead Budget Ending Inventory Budget Direct Materials Budgeted Balance Sheet Budgeted Statement of Cash Flows Learning Objective 2 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) Learning Objective 3 Sales Budget Breakers, Inc. 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. Learning Objective 4 Sales Budget Production Budget The management of Breakers, Inc. 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. Production Budget From sales budget March 31 ending inventory Ending inventory becomes beginning inventory the next month Direct-Material Budget At Breakers, 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 $.40 per pound. Let’s prepare the direct materials budget. Direct-Material Budget From our production budget 10% of the following month’s production March 31 inventory Direct-Material Budget Direct-Labor Budget At Breakers, each unit of product requires 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 $8 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 3,000 hours per month. Let’s prepare the direct labor budget. Direct-Labor Budget From our production budget This is the greater of labor hours required or labor hours guaranteed. Overhead Budget Here is Breakers’ Overhead Budget for the quarter. For the remaining Budgets and Learning Objectives 5 - 8 see the Text Book
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