管理會(huì)計(jì)學(xué)英文版課件：Chap10 Master Budgeting

1、Master BudgetingChapter 10Learning Objective 1Understand why organizations budget and the processes they use to create budgets.2The Basic Framework of BudgetingA budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.The

2、act of preparing a budget is called budgeting.The use of budgets to control an organizations activities is known as budgetary control.3Planning and ControlPlanning involves developing objectives and preparing various budgets to achieve those objectives.Control involves the steps taken by management

3、to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together toward that goal.4Advantages of BudgetingAdvantagesDefine goalsand objectivesUncover potentialbottlenecksCoordinateactivitiesCommunicateplansThink about and

4、plan for the futureMeans of allocatingresources5Responsibility Accounting Managers should be held responsible for those items - and only those items - that they can actually control to a significant extent.6Choosing the Budget PeriodOperating Budget2011201220132014Operating budgets ordinarily cover

5、a one-year periodcorresponding to a companys fiscal year. Many companies divide their annual budget into four quarters.A continuous budget is a12-month budget that rollsforward one month (or quarter)as the current month (or quarter)is completed.7Learning Objective 2Understand Basic Budgeting Terms a

6、nd the Behavioral Aspects of Budgeting.8Bottom-up and Top-down BudgetingBottom-up budgeting(Self-imposed budget or Participative budget )Top-down budgetingTop ManagementMiddle ManagementLower-levelManagementTop ManagementMiddle ManagementLower-levelManagement9Advantages of the Bottom-up Budgeting (S

7、elf-Imposed Budgets)Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management.Budget estimates prepared by front-line managers are often more accurate than estimates prepared by top managers.Motivation is generally higher when indivi

8、duals participate in setting their own goals than when the goals are imposed from above.A manager who is not able to meet a budget imposed from above can claim that it was unrealistic. Self-imposed budgets eliminate this excuse.10How to overcome problems of self-imposed budgetsSelf-imposed budgets s

9、hould be reviewed by higher levels of management to prevent “budgetary slack (or budget padding).”Most companies issue broad guidelines in terms of overall profits or sales. Lower level managers are directed to prepare budgets that meet those targets.11Advantages of the Top-down BudgetingAvoid the p

10、otential budgetary slack (budget padding).Provide a clearer performance goals and expectations from the top management.May provide better budget due to top managements access to privileged/confidential market and organization information .Provide an efficient budgetary process.12Budget LapsingA popu

11、lar method among government agencies, universities and organizations relying on allocated funds.Any unused funding at the end of the financial period cannot be carried forward to the following year. As a result, the following years budget may be cut because of the under-expenditure in the previous y

12、ear.13Budget Lapsing: AdvantagesBudget lapsing helps ensure that the appropriate level of resources is utilized in each period. Without budget lapsing, risk-averse managers may unnecessarily accumulate funds and this may adversely affect the performance of the organization.It helps provide an opport

13、unity for a clean cut-off of expenditures and to reallocate any unused resources for other more appropriate requirements.14Budget Lapsing: Potential Problem & SolutionBudget lapsing can cause undesired behavior effects. For example, managers may wastefully spend their entire budget before the end of

14、 the period in order to avoid budget cuts. A system of reviewing the expenditures near end of the period may uncover unnecessary expenditures and discourage managers to wastefully spend because of budget lapsing.15Incremental versus Zero-based BudgetsIncremental method of budgeting is most commonly

15、used by companies. Companies start off one years budget by referring back to the previous years figures. Adjustments are then made to the budget to account for the expected changes such as prices for the next year. While incremental method of budgeting is practical and fast, any inefficiency in the

16、previous years figures may be carried forward. For example, if all along the organization is over staffed, then the budget will continually to be allowing for the over staffing situation under this method.16Incremental versus Zero-based BudgetsZero-Based Budgets are prepared based on the assumption

17、that the company has just started. Therefore, resources required have to be justified from scratch.For example, when budgeting for staff cost for a restaurant, managers using the zero-based budgeting approach will ignore the existing staff level and expenses, rather, they will examine factors such a

18、s opening hours, number of tables, expected patron numbers to work out the number of staff required at each position and level, hence the associate costs, to produce a budget. 17Incremental versus Zero-based BudgetsCompanies using the zero-based method do not simply ignore previous years figures. Fi

19、gures generated by the zero-based method are usually compared with previous years figures. Any large differences are investigated.As zero-based budgeting is time consuming and costly, companies tend to use this method for the relatively large items and the incremental method for the rest.18Top Manag

20、ement Attitude:Human Factors in BudgetingThe success of a budget program depends on three important factors:Top management must be enthusiastic and committed to the budget process.Top management must not use the budget topressure employees or blame them when something goes wrong. Budget targets shou

21、ld be challenging but achievable in order to have good motivational effects.19The Budget CommitteeA standing committee responsible for overall policy matters relating to the budget coordinating the preparation of the budget resolving disputes related to the budget approving the final budget20Learnin

22、g Objective 3Understand the Key Components of Master Budget in Manufacturing, Merchandising and Service Industries21Understand the key components of master budget in Manufacturing, Merchandising, and Service IndustriesThe first step of budgeting for every business is to budget for the revenue, wheth

23、er it is a sales budget for providing goods or services or a funding budget. Although operational budgets are adapted according to the industries, they are very similar and typically comprise of budgets for Income statementCashBalance sheet. The major differences of different industries include:Manu

24、facturing: production budget is involvedMerchandising: no production budget, only purchase budget of merchandise is required.Service Industries: budget for revenue and cost of providing servicesNot-for-profit: expected funding available and plan usage of funding.22Learning Objective 4Prepare a Maste

25、r Budget for a Manufacturing Company.23The Master Budget: An OverviewProduction budgetSelling andadministrativebudgetDirect materialsbudgetManufacturingoverhead budgetDirect laborbudgetCash BudgetSales budgetEnding inventorybudgetBudgetedbalance sheetBudgetedincomestatement24Learning Objective 4 (a)

26、Prepare a sales budget, including a schedule of expected cash collections.25Budgeting Example Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next five months are:April 20,000 unitsMay 50,000 unitsJune 30,000 unitsJuly 25,000 unitsAugust 15,000 units. The se

27、lling price is $10 per unit.26The Sales BudgetThe individual months of April, May, and June are summed to obtain the total budgeted sales in units and dollars for the quarter ended June 30th27Expected Cash CollectionsAll sales are on account.Royals collection pattern is:70% collected in the month of

28、 sale,25% collected in the month following sale, 5% uncollectible.The March 31 accounts receivable balance of $30,000 will be collected in full.28Expected Cash Collections29Expected Cash CollectionsFrom the Sales Budget for April.30Expected Cash CollectionsFrom the Sales Budget for May.31Quick Check

29、 What will be the total cash collections for the quarter? a. $700,000b. $220,000c. $190,000d. $905,00032 What will be the total cash collections for the quarter? a. $700,000b. $220,000c. $190,000d. $905,000Quick Check 33Expected Cash Collections34Learning Objective 4 (b)Prepare a production budget.3

30、5The Production BudgetProductionBudgetSales BudgetandExpectedCashCollectionsCompletedThe production budget must be adequate to meet budgeted sales and to provide for the desired ending inventory.36The Production BudgetThe management at Royal Company wants ending inventory to be equal to 20% of the f

31、ollowing months budgeted sales in units.On March 31, 4,000 units were on hand.Lets prepare the production budget.37The Production Budget38The Production BudgetMarch 31ending inventory39Quick Check What is the required production for May? a. 56,000 unitsb. 46,000 unitsc. 62,000 unitsd. 52,000 units40

32、 What is the required production for May? a. 56,000 unitsb. 46,000 unitsc. 62,000 unitsd. 52,000 unitsQuick Check 41The Production Budget42The Production BudgetAssumed ending inventory.43Learning Objective 4 (c)Prepare a direct materials budget, including a schedule of expected cash disbursements fo

33、r purchases of materials.44The Direct Materials BudgetAt 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 months production.On March 31, 13,000 pounds of material are on hand. Material co

34、st is $0.40 per pound. Lets prepare the direct materials budget.45The Direct Materials BudgetFrom production budget46The Direct Materials Budget47The Direct Materials BudgetCalculate the materials tobe purchased in May.March 31 inventory10% of following months production needs.48Quick Check How much

35、 materials should be purchased in May? a. 221,500 poundsb. 240,000 poundsc. 230,000 poundsd. 211,500 pounds49 How much materials should be purchased in May? a. 221,500 poundsb. 240,000 poundsc. 230,000 poundsd. 211,500 poundsQuick Check 50The Direct Materials Budget51The Direct Materials BudgetAssum

36、ed ending inventory52Expected Cash Disbursement for MaterialsRoyal pays $0.40 per pound for its materials.One-half of a months purchases is 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.Lets calculate expected cash d

37、isbursements.53Expected Cash Disbursement for Materials54Expected Cash Disbursement for Materials140,000 lbs. $0.40/lb. = $56,000Compute the expected cashdisbursements for materialsfor the quarter.55Quick Check What are the total cash disbursements for the quarter? a. $185,000b. $ 68,000c. $ 56,000d

38、. $201,40056 What are the total cash disbursements for the quarter? a. $185,000b. $ 68,000c. $ 56,000d. $201,400Quick Check 57Expected Cash Disbursement for Materials58Learning Objective 4 (d)Prepare a direct labor budget.59The Direct Labor BudgetAt Royal, each unit of product requires 0.05 hours (3

39、 minutes) of direct labor.The Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week.For purposes of our illustration assume that Royal has a “no layoff” policy, workers are pay at the rate of $10 per hour regardless of the hours worked.For the next three month

40、s, the direct labor workforce will be paid for a minimum of 1,500 hours per month.Lets prepare the direct labor budget.60The Direct Labor BudgetFrom production budget.61The Direct Labor Budget62The Direct Labor BudgetGreater of labor hours requiredor labor hours guaranteed.63The Direct Labor Budget6

41、4Quick 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. $79,500b. $64,500c. $61,000d. $57,00065 What would be the total direct labor cost for the

42、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. $79,500b. $64,500c. $61,000d. $57,000Quick Check 66Learning Objective 4 (e)Prepare a manufacturing overhead budget.67Manufacturing Overhead BudgetAt Roya

43、l, manufacturing overhead is applied to units of product on the basis of direct labor hours.The variable manufacturing overhead rate is $20 per direct labor hour.Fixed manufacturing overhead is $50,000 per month, which includes $20,000 of noncash costs (primarily depreciation of plant assets).Lets p

44、repare the manufacturing overhead budget.68Manufacturing Overhead BudgetDirect Labor Budget.69Manufacturing Overhead BudgetTotal mfg. OH for quarter $251,000Total labor hours required 5,050= $49.70 per hour * rounded70Manufacturing Overhead BudgetDepreciation is a noncash charge.71Ending Finished Go

45、ods Inventory BudgetDirect materialsbudget and information.72Ending Finished Goods Inventory BudgetDirect labor budget.73Ending Finished Goods Inventory BudgetTotal mfg. OH for quarter $251,000Total labor hours required 5,050= $49.70 per hour *74Ending Finished Goods Inventory BudgetProduction Budge

46、t.75Learning Objective 4 (f)Prepare a selling and administrative expense budget.76Selling and Administrative Expense BudgetAt Royal, the selling and administrative expense budget is divided into variable and fixed components.The variable selling and administrative expenses are $0.50 per unit sold.Fi

47、xed 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.Lets prepare the companys selling and administrative expense budget.77Selling and Administrative

48、 Expense BudgetCalculate the selling and administrativecash expenses for the quarter.78Quick Check What are the total cash disbursements for selling and administrative expenses for the quarter? a. $180,000b. $230,000c. $110,000d. $ 70,00079 What are the total cash disbursements for selling and admin

49、istrative expenses for the quarter? a. $180,000b. $230,000c. $110,000d. $ 70,000Quick Check 80Selling Administrative Expense Budget81Learning Objective 4 (g)Prepare a cash budget.82Format of the Cash BudgetThe cash budget is divided into four sections:Cash receipts section lists all cash inflows exc

50、luding cash received from financing;Cash disbursements section consists of all cash payments excluding repayments of principal and interest;Cash excess or deficiency section determines if the company will need to borrow money or if it will be able to repay funds previously borrowed; andFinancing sec

51、tion details the borrowings and repayments projected to take place during the budget period.83The Cash BudgetAssume the following information for Royal:Maintains a 16% open line of credit for $75,000Maintains a minimum cash balance of $30,000Borrows on the first day of the month and repays loans on

52、the last day of the monthPays a cash dividend of $49,000 in AprilPurchases $143,700 of equipment in May and $48,300 in June (both purchases paid in cash)Has an April 1 cash balance of $40,00084The Cash BudgetSchedule of ExpectedCash Collections.85The Cash BudgetDirect LaborBudget.ManufacturingOverhe

53、ad Budget.Selling and AdministrativeExpense Budget.Schedule of ExpectedCash Disbursements.86The Cash BudgetBecause Royal maintainsa cash balance of $30,000,the company must borrow $50,000 on its line-of-credit.87The Cash BudgetEnding cash balance for Aprilis the beginning May balance.Because Royal m

54、aintainsa cash balance of $30,000,the company must borrow $50,000 on its line-of-credit.88The Cash Budget89Quick Check What is the excess (deficiency) of cash available over disbursements for June? a. $ 85,000b. $(10,000)c. $ 75,000d. $ 95,00090 What is the excess (deficiency) of cash available over

55、 disbursements for June? a. $ 85,000b. $(10,000)c. $ 75,000d. $ 95,000Quick Check 91The Cash Budget$50,000 16% 3/12 = $2,000Borrowings on April 1 andrepayment on June 30.92The Budgeted Income StatementCash BudgetBudgetedIncomeStatementCompletedWith interest expense from the cash budget, Royal can pr

56、epare the budgeted income statement. 93Learning Objective 4(h)Prepare a budgeted income statement.94The Budgeted Income StatementSales Budget.Ending FinishedGoods Inventory.Selling and AdministrativeExpense Budget.Cash Budget.95Learning Objective 4 (i)Prepare a budgeted balance sheet.96The Budgeted

57、Balance SheetRoyal reported the following account balances prior to preparing its budgeted financial statements:Land - $50,000Common stock - $200,000Retained earnings - $146,150 (April 1)Equipment - $175,0009711,500 lbs.at $0.40/lb.5,000 unitsat $4.99 each.50% of Junepurchases of $56,800.25% of June

58、sales of $300,000.9899Learning Objective 5Prepare Budget on the Key Components for the Service Industry100Key Budget Components for the Service IndustryWonder World, a hypothetical theme park, has the following data:Main Sources of RevenueMajor ExpensesDepartmentsTicketingFood & BeveragesSouvenir Sh

59、opSalariesRent Cost of SalesAdvertisingMaintenanceDepreciationUtilitiesFinance & AdministrationOperationsMarketingSouvenir ShopFood and BeveragesMaintenance101Learning Objective 5 (a)Prepare a Visitorship Budget102Visitorship BudgetNumber of VisitorsAdults750,000 Children250,000 Total Visitors1,000,

60、000 Based on historical records, economic outlook, tourist arrival expectations, the following visitorship budget for the coming year is prepared:103Learning Objective 5 (b)Prepare a Revenue Budget104Revenue BudgetRevenue per visitorGate Collections : Adults$13 Gate Collections : Children$9 Souvenir