BUDGET
BUDGET
?A detailed plan expressed in quantitative term that specify how an organization will acquire and use resources during a particular period of time.
BENEFITS OF BUDGETS
?Compel managers to think ahead. ?Provide an opportunity to reevaluate existing activities and evaluate new ones. ?Aid managers in communicating objectives and coordinating actions across the organization.
Master Budget Components
Sales Budget Sales Budget
Production Budget
Direct Material Budget Budgeted schedule cost of goods manufactured and sold Direct Labor Budget Mft. Overhead Budget Operational Budget Selling, General and Administrative Budget
Cash budget
Budgeted income Statement
R&D Budget Marketing Budget Customer Service Budget
Capital Budget
Budgeted balance Statement Budgeted Statement of Cash Flows
SALES FORCAST
?A sales forecast is a prediction of sales under a given set of conditions. ?Sales forecasts are usually prepared under the direction of the top sales executive. ?The sales budget is the result of decisions to create conditions that will generate a desired level of sales.
TYPES OF BUDGETS
?Sales Budget ?Production Budget ?Master Budget ?Operating Budget ?Financial Budget ?Cash Budget
SALES BUDGET
?Sales Budget displays the details developed based on the projected sales in units and the projected sales return.
PRODUCTION BUDGET
?Total units required = Sales in units + Desired ending finished goods inventory. ?Units to be produced = Total units required – Expected beginning finished goods inventory.
MASTER BUDGET
?The master budget is a detailed and comprehensive analysis of the first year of the long-range plan. ?It summarizes the planned activities of all subunits of an organization.
?It includes:?Operating Budget:-Focuses on the Income Statement and supporting schedules or budgeted expense. ?Financial Budget:-Focuses on the effects that the operating budget and other plans will have on cash balances.
STEPS FOR MASTER BUDGET
1. Basic data a. Sales budget. b. Cash collections from customers. c. Purchases and cost-of-goods sold budget. d. Cash disbursements for purchases. e. Operating expense budget. f. Cash disbursements for operating expenses.
? Operating Budget 2. Prepare budgeted income statement using basic data in step 1. ? Financial Budget 3. Prepare forecasted financial statements: b. Capital budget c. Cash budget d. Budgeted Balance sheet
OPERATING EXPENSE BUDGET
?The budgeting of operating expenses depends on several factors. ?Month to month changes in sales volume and other cost-drivers activities directly influence many operating expenses. ?Expenses driven by sales volume include sales commissions and many delivery expenses.
?Other expenses are not influenced by sales or other cost driven activity and are regarded as fixed, within appropriate relevant ranges, as:?Rent, ?Depreciation, ?Insurance, ?Salaries.
CASH BUDGET
?The cash budget is a statement of planned cash receipts and disbursements. ?The Cash budget contains these major sections: ? available cash balance, ?net cash receipts and ?disbursements financing.
?Management determines the minimum cash balance desired depending on the nature of the business and credit arrangements. ?Financing requirements depend on how the total cash available compares with the total cash needed. ?Needs include the disbursements plus the desired ending cash balance.
BUDGETED BALANCE SHEET
?The final step in preparing the master budget is to construct the budgeted balance sheet that projects each balance sheet item in accordance with the business plan. ?Management then considers all the major financial statements as a basis for changing the course of events.
THANK YOU
doc_750244922.ppt
BUDGET
?A detailed plan expressed in quantitative term that specify how an organization will acquire and use resources during a particular period of time.
BENEFITS OF BUDGETS
?Compel managers to think ahead. ?Provide an opportunity to reevaluate existing activities and evaluate new ones. ?Aid managers in communicating objectives and coordinating actions across the organization.
Master Budget Components
Sales Budget Sales Budget
Production Budget
Direct Material Budget Budgeted schedule cost of goods manufactured and sold Direct Labor Budget Mft. Overhead Budget Operational Budget Selling, General and Administrative Budget
Cash budget
Budgeted income Statement
R&D Budget Marketing Budget Customer Service Budget
Capital Budget
Budgeted balance Statement Budgeted Statement of Cash Flows
SALES FORCAST
?A sales forecast is a prediction of sales under a given set of conditions. ?Sales forecasts are usually prepared under the direction of the top sales executive. ?The sales budget is the result of decisions to create conditions that will generate a desired level of sales.
TYPES OF BUDGETS
?Sales Budget ?Production Budget ?Master Budget ?Operating Budget ?Financial Budget ?Cash Budget
SALES BUDGET
?Sales Budget displays the details developed based on the projected sales in units and the projected sales return.
PRODUCTION BUDGET
?Total units required = Sales in units + Desired ending finished goods inventory. ?Units to be produced = Total units required – Expected beginning finished goods inventory.
MASTER BUDGET
?The master budget is a detailed and comprehensive analysis of the first year of the long-range plan. ?It summarizes the planned activities of all subunits of an organization.
?It includes:?Operating Budget:-Focuses on the Income Statement and supporting schedules or budgeted expense. ?Financial Budget:-Focuses on the effects that the operating budget and other plans will have on cash balances.
STEPS FOR MASTER BUDGET
1. Basic data a. Sales budget. b. Cash collections from customers. c. Purchases and cost-of-goods sold budget. d. Cash disbursements for purchases. e. Operating expense budget. f. Cash disbursements for operating expenses.
? Operating Budget 2. Prepare budgeted income statement using basic data in step 1. ? Financial Budget 3. Prepare forecasted financial statements: b. Capital budget c. Cash budget d. Budgeted Balance sheet
OPERATING EXPENSE BUDGET
?The budgeting of operating expenses depends on several factors. ?Month to month changes in sales volume and other cost-drivers activities directly influence many operating expenses. ?Expenses driven by sales volume include sales commissions and many delivery expenses.
?Other expenses are not influenced by sales or other cost driven activity and are regarded as fixed, within appropriate relevant ranges, as:?Rent, ?Depreciation, ?Insurance, ?Salaries.
CASH BUDGET
?The cash budget is a statement of planned cash receipts and disbursements. ?The Cash budget contains these major sections: ? available cash balance, ?net cash receipts and ?disbursements financing.
?Management determines the minimum cash balance desired depending on the nature of the business and credit arrangements. ?Financing requirements depend on how the total cash available compares with the total cash needed. ?Needs include the disbursements plus the desired ending cash balance.
BUDGETED BALANCE SHEET
?The final step in preparing the master budget is to construct the budgeted balance sheet that projects each balance sheet item in accordance with the business plan. ?Management then considers all the major financial statements as a basis for changing the course of events.
THANK YOU
doc_750244922.ppt