‫‪9-1‬‬

‫شرح ‪ Budgeting‬من البارت الثانى‬

‫من مجموعة جليم‬

‫‪McGraw-Hill/Irwin‬‬
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9 ‫ةةةةةةةة‬
‫ةةةةةةةة‬
‫ة‬
Profit Planning,
Budgeting
Activity-Based Budgeting
and e-Budgeting

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Purposes of Budgeting Systems

Budget ➊ Planning
a detailed plan, ➋ Facilitating
expressed in Communication and
quantitative terms, Coordination
that specifies how ➌ Allocating Resources
resources will be ➍ Controlling Profit and
acquired and used Operations
during a specified ➎ Evaluating Performance
period of time. and Providing Incentives

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Types of Budgets
Detail
Budget
Detail

Materials
Budget
Detail

Production
Budget
Master
Budget
Covering all Sales
phases of
a company’s
operations.

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Types of Budgets
Capital
Capital budgets
budgets with
with acquisitions
acquisitions
that
that normally
normally cover
cover several
several years.
years.
Long Range Budgets

Continuous or
Rolling Budget
1999 2000 2001 2002

This
This budget
budget is
is usually
usually aa twelve-month
twelve-month
budget
budget that
that rolls
rolls forward
forward one
one month
month
as
as the
the current
current month
month isis completed.
completed.

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Sales of Services or Goods

Ending
Inventory
Budget Production
Work
Work in
in Process
Process Budget
and
and Finished
Finished
Goods
Goods

Direct Direct Selling and

Overhead
Materials Labor Administrative
Budget Budget Budget
Budget

Ending
Inventory
Budget
Direct
Direct Materials
Materials

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Sales of Services or Goods
Exh.
9-1

Ending
Inventory
Budget Production
Work
Work in
in Process
Process Budget
and
and Finished
Finished
Goods
Goods

Direct Direct Selling and

Overhead
Materials Labor Administrative
Budget Budget Budget
Budget

Ending Cash Budget

Inventory
Budget
Direct
Direct Materials
Materials Budgeted Financial Statements
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1- Sales Budget
➊
➊Breakers,
Breakers, Inc.
Inc. is
is preparing
preparing budgets
budgets for
for the
the
quarter
quarter ending
ending June
June 30.
30.
➋
➋Budgeted
Budgeted sales
sales for
for the
the next
next five
five months
months are:
are:
April
April 20,000
20,000 units
units
May
May 50,000
50,000 units
units
June
June 30,000
30,000 units
units
July
July 25,000
25,000 units
units
August
August 15,000
15,000 units.
units.
➌
➌The
The selling
selling price
price is
is $10
$10 per
per unit.
unit.

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Sales Budget
April May June Quarter
Budgeted
sales (units) 20,000 50,000 30,000 100,000
Selling price
per unit $ 10 $ 10 $ 10 $ 10
Total
Revenue $200,000 $500,000 $300,000 $1,000,000

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2- Production Budget

Sales Production
Budget Budget
t ed
e
pl
om
C

Production must be adequate to meet budgeted

sales and provide for sufficient ending inventory.

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Production Budget
The
The management
management of of Breakers,
Breakers, Inc.
Inc. wants
wants
ending
ending inventory
inventory to
to be
be equal
equal to
to 20%
20% ofof the
the
following
following month’s
month’s budgeted
budgeted sales
sales in
in units.
units.

On
On March
March 31,
31, 4,000
4,000 units
units were
were on
on hand.
hand.

Let’s
Let’s prepare
prepare the
the production
production
budget.
budget.

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Production Budget
April May June Quarter
Sales in units 20,000
Add: desired
end. inventory
Total needed
Less: beg.
inventory
Units to be
started

From sales
budget

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Production Budget
April May June Quarter
Sales in units 20,000
Add: desired
end. inventory 10,000
Total needed 30,000
Less: beg.
inventory
Units to be
started

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Production Budget
April May June Quarter
Sales in units 20,000
Add: desired
end. inventory 10,000
Total needed 30,000
Less: beg.
inventory 4,000
Units to be
started 26,000

March 31
ending inventory

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Production Budget
April May June Quarter
Sales in units 20,000 50,000
Add: desired
end. inventory 10,000 6,000
Total needed 30,000 56,000
Less: beg.
inventory 4,000 10,000
Units to be
started 26,000 46,000

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Production Budget
April
April May
May June
June Quarter
Quarter
Sales
Salesin inunits
units 20,000
20,000 50,000
50,000 30,000
30,000 100,000
100,000
Add:
Add:desired
desired
end.
end.inventory
inventory 10,000
10,000 6,000
6,000 5,000
5,000 5,000
5,000
Total
Totalneeded
needed 30,000
30,000 56,000
56,000 35,000
35,000 105,000
105,000
Less:
Less:beg.beg.
inventory
inventory 4,000
4,000 10,000
10,000 6,000
6,000 4,000
4,000
Units
Unitstotobe
be
started
started 26,000
26,000 46,000
46,000 29,000
29,000 101,000
101,000

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3- Direct-Material Budget
✻At
✻ At Breakers,
Breakers, five
five pounds
pounds ofof material
material are
are
required
required per
per unit
unit of
of product.
product.
✻Management
✻ Management wantswants materials
materials on
on hand
hand at at the
the
end
end of
of each
each month
month equal
equal to
to 10%
10% ofof the
the
following
following month’s
month’s production.
production.
✻On
✻ On March
March 31,
31, 13,000
13,000 pounds
pounds ofof material
material areare on
on
hand.
hand. Material
Material cost
cost $.40
$.40 per
per pound.
pound.

Let’s
Let’s prepare
prepare the
the direct
direct materials
materials budget.
budget.

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Direct-Material Budget

From our
production
budget
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Direct-Material Budget

10% of the following

month’s production
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Direct-Material Budget

March 31
inventory
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Direct-Material Budget

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Direct-Material Budget
July Production
Sales in units 25,000
Add: desired ending inventory 3,000
Total units needed 28,000
Less: beginning inventory 5,000
Production in units 23,000

June Ending Inventory

July production in units 23,000
Materials per unit 5
Total units needed 115,000
Inventory percentage 10%
June desired ending inventory 11,500

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Direct-Labor Budget
✻ At Breakers, each unit of product requires 0.1 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.
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Direct-Labor Budget

From our
production
budget

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Direct-Labor Budget

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Direct-Labor Budget

This is the greater of

labor hours required or
labor hours guaranteed.

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Direct-Labor Budget

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4 - Overhead Budget
Here is Breakers’ Overhead Budget for the quarter.

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5 - Selling and Administrative 29

Expense Budget
✻At
✻ At Breakers,
Breakers, variable
variable selling
selling and
and
administrative
administrative expenses
expenses areare $0.50
$0.50 perper unit
unit
sold
sold..
✻Fixed
✻ Fixed selling
selling and
and administrative
administrative expenses
expenses
are
are $70,000
$70,000 per
per month.
month.
✻The
✻ The $70,000
$70,000 fixed
fixed expenses
expenses include
include
$10,000
$10,000 inin depreciation
depreciation expense
expense that that does
does
not
not require
require aa cash
cash outflows
outflows for
for the
the month.
month.

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Selling and Administrative 30

Expense Budget

From our
Sales budget
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Selling and Administrative 31

Expense Budget

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Selling and Administrative 32

Expense Budget

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6- Cash Receipts Budget

✻At
✻ At Breakers,
Breakers, all
all sales
sales are
are on
on account.
account.
✻The
✻ The company’s
company’s collection
collection pattern
pattern is:
is:
70%
70% collected
collected in
in the
the month
month of
of sale,
sale,
25%
25% collected
collected in
in the
the month
month following
following sale,
sale,
5%
5% is
is uncollected.
uncollected.
✻The
✻ The March
March 31
31 accounts
accounts receivable
receivable
balance
balance of
of $30,000
$30,000 will
will be
be collected
collected in
in full.
full.

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Cash Receipts Budget

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Cash Receipts Budget

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7 - Cash Disbursement Budget

✻Breakers
✻ Breakers pays
pays $0.40
$0.40 per
per pound
pound for
for its
its
materials.
materials.
✻One-half
✻ One-half ofof aa month’s
month’s purchases
purchases are
are paid
paid for
for in
in
the
the month
month of
of purchase;
purchase; the
the other
other half
half isis paid
paid in
in
the
the following
following month.
month.
✻No
✻ No discounts
discounts areare available.
available.
✻The
✻ The March
March 31
31 accounts
accounts payable
payable balance
balance is
is
$12,000.
$12,000.

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Cash Disbursement Budget

140,000 lbs. × $.40/lb. = $56,000

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Cash Disbursement Budget

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Cash Disbursement Budget
Continued
Breakers:
Breakers:
●● Maintains
Maintains aa 12%
12% open
open line
line of
of credit
credit for
for $75,000.
$75,000.
●● Maintains a minimum cash balance of $30,000.
Maintains a minimum cash balance of $30,000.
●● Borrows
Borrows and
and repays
repays loans
loans on
on the
the last
last day
day of
of the
the
month.
month.
●● Pays a cash dividend of $25,000 in April.
Pays a cash dividend of $25,000 in April.
●● Purchases
Purchases $143,700
$143,700 of
of equipment
equipment in
in May
May and
and
$48,300
$48,300 in
in June
June paid
paid in
in cash.
cash.
●● Has an April 1 cash balance of $40,000.
Has an April 1 cash balance of $40,000.
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Cash Disbursement Budget
Continued

From our Cash

Receipts Budget

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Cash Disbursement Budget
Continued

From our Cash

Disbursements
Budget

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Cash Disbursement Budget
Continued

From our Direct

Labor Budget

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Cash Disbursement Budget
Continued

From our
Overhead Budget

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Cash Disbursement Budget
Continued

From our
Selling and Administrative
Expense Budget

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Cash Disbursement Budget
Continued

To maintain a cash
balance of $30,000,
Breakers must borrow
$35,000 on its line of credit.

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Cash Disbursement Budget
Financing and Repayment

Ending cash balance for April

is the beginning May balance.

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Cash Disbursement Budget
Continued

Breakers must
borrow an
addition $13,800
to maintain a
cash balance
of $30,000.

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Cash Disbursement Budget
Financing and Repayment

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Cash Disbursement Budget
Continued
At the end of June, Breakers
has enough cash to repay
the $48,800 loan plus interest
at 12%.

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Cash Disbursement Budget
Financing and Repayment

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Cash Disbursement Budget
Continued

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Cash Disbursement Budget
Financing and Repayment

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Budgeted Income Statement

Cash Budgeted
Budget Income
Statement
t ed
e
pl
om
C

After we complete the cash budget, we can prepare

the budgeted income statement for Breakers.

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Budgeted Ending Inventory

Manufacturing overhead is applied on the basis of direct labor hours.
Production costs per unit Quantity Cost Total
Direct materials 5.00 lbs. $ 0.40 $ 2.00
Direct labor 0.10 hrs. $ 8.00 0.80
Manufacturing overhead 0.10 hrs. $18.02 1.80
$ 4.60
Budgeted finished goods inventory
Ending inventory in units 5,000
Unit product cost $ 4.60
Ending finished goods inventory $23,000

Total overhead $191,000

= $18.02 per hr.*
Total labor hours 10,600 hrs.

*rounded
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Budgeted Income Statement

Breakers, Inc.
Budgeted Income Statement
For the Three Months Ended June 30
Revenue (100,000 × $10) $ 1,000,000
Cost of goods sold (100,000 × $4.60) 460,000
Gross margin 540,000
Operating expenses:
Selling and admin. Expenses $ 260,000
Interest expense 838
Total operating expenses 260,838
Net income $ 279,162

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Budgeted Balance Sheet

Breakers
Breakers reports
reports the
the following
following account
account
balances
balances on
on June
June 3030 prior
prior to
to preparing
preparing its
its
budgeted
budgeted financial
financial statements:
statements:
●
● Land
Land -- $50,000
$50,000
● Building
●
Building (net)
(net) -- $148,000
$148,000
● Common
●
Common stock
stock -- $200,000
$200,000
● Retained
●
Retained earnings
earnings -- $46,400
$46,400

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25%of June
sales of
$300,000

11,500 lbs. at
$.40 per lb.

5,000 units at
$4.60 per unit.

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50% of June
purchases
of $56,800

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Budget Administration

The
The Budget
Budget Committee
Committee is
is aa standing
standing
committee
committee responsible
responsible for
for .. .. ..
●
● overall
overall policy
policy matters
matters relating
relating to
to the
the budget.
budget.
● coordinating
●
coordinating the
the preparation
preparation of
of the
the budget.
budget.

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Zero-Base Budgeting
To receive funding during the budgeting
process, each activity must be justified in
terms of its continued usefulness.

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International Aspects of Budgeting

Firms
Firms with
with international
international operations
operations face
face special
special
problems
problems when
when preparing
preparing aa budget.
budget.
➊
➊ Fluctuations
Fluctuations inin foreign
foreign currency
currency exchange
exchange rates.
rates.
➋ High
➋
High inflation
inflation rates
rates inin some
some foreign
foreign countries.
countries.
➌ Differences
➌
Differences inin local
local economic
economic conditions.
conditions.

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Behavioral Impact of Budgets

Budgetary Slack: Padding the Budget
People often perceive that their performance will
look better in their superiors’ eyes if they can
“beat the budget.”

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Participative Budgeting

T o p M a n a g e m e n t

M i d d l e M i d d l e
M a n a g e m e n t M a n a g e m e n

S u p e r v Si s u o p r e r v Si s u o p r e r v Si s u o p r e r v i s

Flow of Budget Data

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End of Chapter 9

McGraw-Hill/Irwin