Cost Accounting (18)

8/10/2019 Cost Accounting (18)

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Manac II

Term IIPGP 18 Batch

Pankaj Baag

Faculty Block 01, Room No 21

Mob: 8943716269

Ph (O): 0495-2809121

Ext. 121

Email: [email protected]
mailto:[email protected]:[email protected]


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Transfer Pricing

Chapter 22


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Market-based Transfer Prices

Cost-based Transfer Prices

Negotiated Transfer Prices

Three Transfer Pricing Methods

General Transfer-Pricing Rule

Transfer Price = Additional outlay cost perunit incurred because

goods are transferred+

Opportunity cost per unitto the organization

because of the transfer


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Budgetary control & Flexible budget

Chapter 6,7,8


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Purposes of Budgeting Systems

Budget

a detailed plan,expressed in

quantitative terms, that

specifies how resourceswill be acquired and

used during a specifiedperiod of time.

1. Planning2. Facilitating Communication

and Coordination

3. Allocating Resources

4. Controlling Profit andOperations

5. Evaluating Performance

and Providing Incentives

9-5

The procedures used to develop a

budget constitute a budgeting

system.

Budgeting systems

have five primary

purposes:


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Types of Budgets

Detail

BudgetDetail

Budget

DetailBudget

Master

BudgetCovering all

phases of

a companys

operations.

Production

9-6

Different types of budgets serve

different purposes.

A master budget, or profit plan, is

a comprehensive set of detailedbudgets covering all phases of an

organizations operations for a

specified period of time.


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Types of Budgets

Budgeted

Financial

Statements

Balance Sheet

IncomeStatement

Statement of

Cash Flows

9-7

Budgeted financial

statements, often called

pro forma financialstatements, show how

the organizations

financial statements will

appear at a specified

time if operations

proceed according toplan.

Budgeted financial

statements include abudgeted income

statement, a budgeted

balance sheet, and a

budgeted statement of

cash flows


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Types of Budgets

1999 2000 2001 2002

Continuous or

Rolling Budget

This budget is usually a twelve-month

budget that rolls forward one month

as the current month is completed.

L o n g R a n g e B u d g e t s

Capital budgets with acquisitions

that normally cover several years.

Financial budgets with financial

resource acquisitions.

9-8

A capital budget is a plan for the

acquisition of capital assets, such as

buildings and equipment.

A financial budget is a plan that shows

how the organization will acquire its

financial resources, such as through the

issuance of stock or incurrence of debt.

Budgets are developed for specific time periods.

Short-range budgets cover a year, a quarter, or a

month, whereas long-range budgets cover

periods longer than a year.

Rolling budgets are continually

updated by periodically adding a

new incremental time period, such

as a quarter, and dropping the period

just completed.

Rolling budgets are also called

revolving budgets or continuous

budgets


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Budgeted IncomeStatement

Cash Budget

Sales of Services or Goods

EndingInventory

BudgetWork in Process

and FinishedGoods

ProductionBudget

Direct

MaterialsBudget

Selling and

AdministrativeBudget

Direct

LaborBudget

OverheadBudget

Ending

InventoryBudget

Direct Materials

Budgeted Balance

SheetBudgeted Statement of

Cash Flows

9-9

The master

budget

comprises many

separate

budgets, orschedules, that

are

interdependent.


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Based on the sales budget, a company develops a set of operational budgets that specify

how its operations will be carried out to meet the demand for its goods or services.

A manufacturing company develops a production budget, which shows the number of

product units to be manufactured and ending inventory budgets.

From the production budget, a manufacturer develops budgets for the direct materials,direct labor, and overhead that will be required in the production process.

A budget for selling and administrative expenses also is prepared.

The operational portion of the master budget is similar in a merchandising firm, but

instead of a production budget for goods, a merchandiser develops a budget for

merchandise purchases.

A merchandising firm will not have a budget for direct materials.

Based on the sales budget for its services, a service industry firm develops a set of budgets

that show how the demand for those services will be met.

Every business prepares a cash budget.

This budget shows expected cash receipts, as a result of selling goods or services, and

planned cash disbursements, to pay the bills incurred by the firm.

The final portion of the master budget includes a budgeted income statement, a budgeted

balance sheet, and a budgeted statement of cash flows.


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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)

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Applying ABC concepts to the budgeting process yields activity-based budgeting or ABB.

Under ABB, the first step is to specify the products or services to beproduced and the customers to be served.

Then the activities that are necessary to produce these productsand services are determined.

Finally, the resources necessary to perform the specified activitiesare quantified.

Conceptually, ABB takes the ABC model and reverses the flow of the

analysis. ABC assigns resource costs to activities, and then it assigns activity

costs to products and services produced and customers served.

ABB, on the other hand, begins by forecasting the demand forproducts and services as well as the customers to be served.

These forecasts then are used to plan the activities for the budgetperiod and budget the resources necessary to carry out theactivities.


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Sales Budget

Breakers, Inc. is preparing budgets for the quarterending 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 unitsAugust 15,000 units.

The selling price is $10 per unit.

9-13


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Breakers, Inc. is preparing budgets for the

quarter ending June 30.

The unit sales are projected for the months of

April through August.

The selling price per unit is budgeted at $10.


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Sales Budget

April May June Quarter

Budgeted

sales (units) 20,000 50,000 30,000 100,000

Selling priceper unit 10$ 10$ 10$ 10$Total

Revenue 200,000$ 500,000$ 300,000$ 1,000,000$

9-15

The projected units are multiplied by $10 for each month to determine the

budgeted revenue for the months of April, May, June and the quarter.


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Now that the sales budget is complete, the productionbudget can be prepared.

The purpose of the production budget is to ensurethat production meets budgeted sales and providessufficient ending inventory.

Production must be adequate to meet budgeted salesand provide for sufficient ending inventory.

Management has determined that the endinginventory should be equal to 20% of the sales for thefollowing month.

At the end of March, there were 4,000 units on hand


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Production Budget

The management of Breakers, Inc. wants endinginventory to be equal to 20% of the following

months budgeted sales in units.

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

Lets prepare the production budget.

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The number of units projected to be sold in the first month is obtainedfrom the sales budget.

The desired ending inventory is calculated by multiplying the projectedsales for the next month, May, by 20%.

This is added to the projected sales to determine the units needed for

April. The ending inventory for the previous month, March, is deducted from the

amount needed to determine the number of units that must be produced.

The ending inventory for the first month, April, becomes the beginninginventory for the second month.

The May and June production budget are prepared in the same manner as

April. Sales in units for the quarter is the sum of April, May and June sales.

Since the end of June is also the end of the quarter, the ending inventoryfor the quarter is the same as the ending inventory for June.

Since the beginning of April is also the beginning of the quarter, thebeginning inventory for the quarter is the same as Aprils beginninginventory.

Total units needed for the quarter is the sum of the sales units and theending inventory.

The beginning inventory is subtracted from the total units needed toarrive at the units to be produced for the quarter.


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Sales in units 20,000 50,000 30,000 100,000

Add: desired

end. inventory 10,000 6,000 5,000 5,000

Total needed 30,000 56,000 35,000 105,000Less: beg.

inventory 4,000 10,000 6,000 4,000Units to be

produced 26,000 46,000 29,000 101,000

Production BudgetFrom

sales

budget

May sales 50,000 units

Desired percent 20%

Desired inventory 10,000 units

March 31

ending inventoryEnding inventory becomes beginning

inventory the next month

9-19


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The first row in the direct materials budget is the units to beproduced each month and for the quarter.

This information is obtained from the production budget.

For each month, the units to be produced needs to bemultiplied by 5 pounds to determine the amount of directmaterials needed in each month.

The ending inventory for April is 10% of Mays direct materialneeds.

The desired ending inventory for April is added to theproduction needs for April

The beginning inventory is subtracted from the total directmaterial needed for the month to arrive at the materials to bepurchased.

The calculations are the same for each month.

As in the production budget, the ending inventory for thequarter is the same as the ending inventory for June and thebeginning inventory for the quarter is the same as thebeginning inventory in April.


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April May June Quarter Production in units 26,000 46,000 29,000 101,000

Materials per unit 5 5 5 5

Production needs 130,000 230,000 145,000 505,000

Add: desiredendinginventory 23,000 14,500 11,500 11,500

Total needed 153,000 244,500 156,500 516,500

Less: beginning

inventory 13,000 23,000 14,500 13,000Materials to be

purchased 140,000 221,500 142,000 503,500

Direct-Material BudgetFrom ourproduction

budget

10% of the following

months production

March 31

inventory

9-22


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Remember:

The ending direct material inventory for June

requires a bit more explanation. The projections for July must be expanded

upon to determine the production budget for

July, which will provide the informationnecessary to calculate the materials needed

for Junes ending inventory.


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Production in units 26,000 46,000 29,000 101,000

Materials per unit 5 5 5 5

Production needs 130,000 230,000 145,000 505,000

Add: desired

endinginventory 23,000 14,500 11,500 11,500

Total needed 153,000 244,500 156,500 516,500

Less: beginning

inventory 13,000 23,000 14,500 13,000Materials to be

purchased 140,000 221,500 142,000 503,500

June Ending Inventory

July production in units 23,000

Materials per unit 5Total units needed 115,000

Inventory percentage 10%

June desired ending inventory 11,500

Direct-Material Budget

July ProductionSales 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

9-24


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Direct-Labor Budget

At Breakers, each unit of product requires 0.1 hours ofdirect 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 willbe paid for a minimum of 3,000 hours per month.

Lets prepare the direct labor budget.

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Each unit can be produced in one tenth of anhour.

Breakers pays employees for 40 hours each

week. The wage rate is $8 per hour and there is no

overtime pay.

Management has projected that directlaborers will be paid for a minimum of 3,000hours per month for the next three month.


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April May June Quarter Production in units 26,000 46,000 29,000 101,000

Direct labor hours 0.10 0.10 0.10 0.10

Labor hours required 2,600 4,600 2,900 10,100

Guaranteed labor

hours 3,000 3,000 3,000Labor hours paid 3,000 4,600 3,000 10,600

Wage rate 8$ 8$ 8$ 8$

Total direct labot cost 24,000$ 36,800$ 24,000$ 84,800$

Direct-Labor Budget

From our

production

budget

This is the greater of

labor hours required or

labor hours guaranteed.

9-27


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The direct labor budget starts with the units to beproduced from the production budget.

The production for each month and the quarter ismultiplied by one tenth of an hour to determinethe labor hours required.

The labor hours required is compared to theguaranteed of labor hours.

The labor hours to be paid is the greater of the twofor each month.

The labor hours to be paid for the quarter is thesum of the labor hours paid for the three months

The labor hours paid is multiplied by the $8 wagerate to determine the total direct labor cost.


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Selling and Administrative Expense

Budget

At Breakers, variable selling and administrativeexpenses are $0.50 per unit sold.

Fixed selling and administrative expenses are $70,000per month.

The $70,000 fixed expenses include $10,000 in

depreciation expense that does not require a cashoutflows for the month.

9-30


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$10,000 of the fixed expenses is for

depreciation, which does not require a cash

outflow.

This information will be important when the

cash disbursements budget is prepared.


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Selling and Administrative Expense

Budget


Sales in units 20,000 50,000 30,000 100,000

Variable S&A rate 0.50$ 0.50$ 0.50$ 0.50$

Variable expense 10,000$ 25,000$ 15,000$ 50,000$

Fixed S&Aexpense 70,000 70,000 70,000 210,000

Total expense 80,000 95,000 85,000 260,000

Less: noncash

expenses 10,000 10,000 10,000 30,000Cash

disbursements 70,000$ 85,000$ 75,000$ 230,000$

From our

Sales budget9-32

Once again we start with the units sales for each


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Once again, we start with the units sales for eachmonth and the quarter from the sales budget.

The sales for each month and the quarter aremultiplied by the variable selling and administrative

cost rate of 50 cents to determine the variable S&Acosts.

This is added to the fixed S&A costs of $70,000 for eachmonth to arrive at the total S&A expenses for eachmonth.

Dont forget that the fixed S&A expenses for thequarter is the sum of fixed S&A expenses for the threemonths.

The noncash expenses are deducted from the total

expenses to determine the amount of cashdisbursements required for each month and thequarter for selling and administrative expenses.


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At Breakers, all sales are on account. The companys collection pattern is:

70% collected in the month of sale,

25% collected in the month following sale,5% is uncollected.

The March 31 accounts receivable balance of $30,000

will be collected in full.

Cash Receipts Budget

9-34


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April May June Quarter Accounts rec. - 3/31 30,000$ 30,000$

April sales

70% x $200,000 140,000 140,000

25% x $200,000 50,000$ 50,000

May sales

70% x $500,000 350,000 350,000

25% x $500,000 125,000$ 125,000

June sales

70% x $300,000 210,000 210,000

Total cash collections 170,000$ 400,000$ 335,000$ 905,000$

Cash Receipts Budget

9-35

What will be the receivables balance for each

month?


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During April, the remained of Marchs sales will becollected, which is the $30,000 accounts receivablebalance on March 31.

70% of Aprils sales are also expected to be

collected in April.

Therefore, the total collections expected in April is

$170,000 Mays collections will be 25% of Aprils sales and

70% of Mays sales.

Junes collections will be 25% of Mays sales and

70% of Junes sales.

The collections for the quarter is the sum of thecollections for the three months


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Cash Disbursement Budget

Breakers pays $0.40 per pound for its materials.

One-half of a months purchases are paid for in the

month of purchase; the other half is paid in thefollowing month.

No discounts are available.

The March 31 accounts payable balance is $12,000.

9-37


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Accounts pay. 3/31 12,000$ 12,000$

April purchases

50% x $56,000 28,000 28,000

50% x $56,000 28,000$ 28,000

May purchases

50% x $88,600 44,300 44,300

50% x $88,600 44,300$ 44,300

June purchases

50% x $56,800 28,400 28,400Total cash payments

for materials 40,000$ 72,300$ 72,700$ 185,000$


140,000 lbs. $.40/lb. = $56,000

9-38


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The purchases for each month is multiplied by 40cents to determine the cost of materialspurchased for the month.

This cost is then multiplied by 50%. 50% of Aprils

materials purchases will be paid for in April, theremaining 50% will be paid in May.

This pattern is followed in May and June todetermine the cash disbursements for materialsfor each month.

The cash disbursements for each month areadded together to determine the cashdisbursements for the quarter.


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Breakers:

Maintains a 12% open line of credit for $75,000.

Maintains a minimum cash balance of $30,000.

Borrows and repays loans on the last day of themonth.

Pays a cash dividend of $25,000 in April.

Purchases $143,700 of equipment in May and$48,300 in June paid in cash.

Has an April 1 cash balance of $40,000.

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Breakers will also make cash disbursements

for payments on an open line of credit, loans,

a cash dividend, and equipment purchases.

All borrowings and repayments occur on the

last day of each month.

From our Cash


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April May June Quarter Beginning cash balance 40,000$

Add: cash collections 170,000

Total cash available 210,000

Less: disbursements

Materials 40,000Direct labor 24,000

Mfg. overhead 56,000

Selling and admin. 70,000

Equipment purchase -

Dividends 25,000Total disbursements 215,000

Excess (deficiency) of

Cash available over

disbursements (5,000)$

To maintain a cash

balance of $30,000,

Breakers must borrow

$35,000 on its line of credit.

Cash Budget(Collections and Disbursements)

Receipts Budget

From our Cash Disbursements

Budget

From our Direct Labor Budget

From our Overhead Budget

From our Selling and

Administrative Expense Budget

9-42

The cash budget is a combination of the cash receipts budget the


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The cash budget is a combination of the cash receipts budget, thecash disbursements for materials budget and other cashdisbursements required, such as for direct materials, overhead, etc.

The cash budget starts with the beginning cash balance for April.

This is also the beginning cash balance for the quarter.

The cash collections for the month are found on the cash receiptsbudget and added to the beginning cash balance to arrive at thetotal cash available.

The cash outflow for materials is found on the cash disbursementsbudget.

The cash outflow for wages can be found on the direct laborbudget.

Cash outflow requirements for manufacturing overhead can befound on the overhead budget.

Cash outflow for S&A costs can be found on the selling and

administrative expense budget. There are no equipment purchases made in April, but there are

dividends paid.

The disbursements are totalled and them subtracted from the totalcash available for the month.

In April, there is a cash deficit.


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April May June Quarter Beginning cash balance 40,000$ 30,000$

Add: cash collections 170,000 400,000

Total cash available 210,000 430,000

Less: disbursements

Materials 40,000 72,300Direct labor 24,000 36,800

Mfg. overhead 56,000 76,000

Selling and admin. 70,000 85,000

Equipment purchase - 143,700

Dividends 25,000 -Total disbursements 215,000 413,800


Cash available over

disbursements (5,000)$ 16,200$


Breakers mustborrow an

addition $13,800

to maintain a

cash balanceof $30,000.

9-44


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April May June Quarter Beginning cash balance 40,000$ 30,000$ 30,000$

Add: cash collections 170,000 400,000 335,000

Total cash available 210,000 430,000 365,000

Less: disbursements

Materials 40,000 72,300 72,700Direct labor 24,000 36,800 24,000

Mfg. overhead 56,000 76,000 59,000

Selling and admin. 70,000 85,000 75,000

Equipment purchase - 143,700 48,300

Dividends 25,000 - -Total disbursements 215,000 413,800 279,000


Cash available over

disbursements (5,000)$ 16,200$ 86,000$

At the end of June, Breakers has

enough cash to repay

the $48,800 loan plus interest at

12%.


9-46


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Junes collections and disbursements budget

follows the same format.

There will be enough cash at the end of June

to repay the amounts borrowed in April and

May plus the 12% interest.

h d


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April May June Quarter Beginning cash balance 40,000$ 30,000$ 30,000$ 40,000$

Add: cash collections 170,000 400,000 335,000 905,000

Total cash available 210,000 430,000 365,000 945,000

Less: disbursements

Materials 40,000 72,300 72,700 185,000Direct labor 24,000 36,800 24,000 84,800

Mfg. overhead 56,000 76,000 59,000 191,000

Selling and admin. 70,000 85,000 75,000 230,000

Equipment purchase - 143,700 48,300 192,000

Dividends 25,000 - - 25,000Total disbursements 215,000 413,800 279,000 907,800


Cash available over

disbursements (5,000)$ 16,200$ 86,000$ 37,200$


9-48


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The beginning cash balance for the quarter isAprils beginning cash balance.

The cash collections for the quarter are added todetermine the total cash available for the quarter.

Each items cash disbursements are totalled forthe quarter and then added together todetermined the total cash disbursements for thequarter.

The disbursements for the quarter are thendeducted from the collections for the quarter.

There is a $37,200 cash surplus for the quarter.

C h dEnding cash balance


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Cash available overdisbursements (5,000)$ 16,200$ 86,000$ 37,200$

Financing: Borrowing 35,000 13,800 48,800Repayments - - (48,800) (48,800)

Interest - - (838) (838)

Total financing 35,000 13,800 (49,638) (838)

Ending cash balance 30,000$ 30,000$ 36,362$ 36,362$

Cash Budget(Financing and Repayment)

for April

is the beginning May

balance.

Borrowing RateAnnualInterest

MonthsOutstanding

InterestExpense

35,000$ 12% = 4,200$ 2 mths = 700$

13,800 12% = 1,656 1 mth. = 138

838$

9-50


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Cost of Goods Manufactured

April May June Quarter Direct material:

Beg.material inventory 5,200$ 9,200$ 5,800$ 5,200$

Add: Materials purchases 56,000 88,600 56,800 201,400

Material available for use 61,200 97,800 62,600 206,600

Deduct: End. material inventory 9,200 5,800 4,600 4,600Direct material used 52,000 92,000 58,000 202,000

Direct labor 24,000 36,800 24,000 84,800

Manufacturing overhead 56,000 76,000 59,000 191,000

Total manufacturing costs 132,000 204,800 141,000 477,800

Add: Beg. Work-in-process inventory 3,800 16,200 9,400 3,800

Subtotal 135,800 221,000 150,400 481,600Deduct: End.Work-in-process inventory 16,200 9,400 17,000 17,000

Cost of goods manufactured 119,600$ 211,600$ 133,400$ 464,600$

9-52

Th f d f d h d l i


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The cost of goods manufactured schedule isprepared from the direct materials budget, thedirect labor budget and the overhead budget.

The ending work-in-process inventory amountsare estimates provided by management.

The amounts for direct materials are in dollars,

not units. The direct materials beginning inventory,

purchases and ending inventory amounts weretaken from the direct materials budget.

These amounts were multiplied by the cost of 40cents (mentioned earlier)per pound to arrive atthe dollar amounts.


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Cost of Goods Sold

April May June Quarter Cost of goods manufactured 119,600$ 211,600$ 133,400$ 464,600$

Add: Beg. finished-goods inventory 18,400 46,000 27,600 18,400

Cost of goods available for sale 138,000 257,600 161,000 483,000

Deduct: End. finished-goods inventory 46,000 27,600 23,000 23,000

Cost of goods sold 92,000$ 230,000$ 138,000$ 460,000$

9-54

The cost of goods sold schedule starts where the cost of goods manufactured left off.

The cost of goods manufactured at the beginning of April can be divided by the units

manufactured, 26,000, to arrive at a unit cost of $4.60.

The 4,000 units in finished goods inventory at the beginning of April is multiplied by the

unit cost to determine the beginning inventory cost.

The ending inventory for each month is also multiplied by $4.60 to determine the cost ofthe ending inventory.

Remember, the ending inventory for one month becomes the beginning inventory for the

following month.

The beginning inventory for the quarter is the same as the beginning inventory for April

and the ending inventory for the quarter is the same as the ending inventory for June.


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Budgeted Income Statement

Revenue (100,000 $10) 1,000,000$

Cost of goods sold 460,000

Gross margin 540,000Operating expenses:

Selling and admin. expenses 260,000$

Interest expense 838

Total operating expenses 260,838

Net income 279,162$

Breakers, Inc.

Budgeted Income Statement

For the Three Months Ended June 30

9-55

Now that the cost of goods manufactured and cost of


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Now that the cost of goods manufactured and cost ofgoods sold schedules are complete, the budgetedincome statement can be prepared.

A budgeted income statement for the quarter endingJune 30 can now be prepared for Breakers.

Revenue is taken from the sales budget.

Cost of goods sold is taken from the cost of goods soldschedule.

Gross margin is revenue less cost of goods sold.

The operating expenses is taken from the selling and

administrative expense budget and the cash budget. Net income is gross margin less total operating

expenses.

The information for the budgeted statement of cash flows can be taken from the cash


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Budgeted Statement of Cash FlowsApril May June Quarter

Cash flows from operating activities:Cash receipts from customers 170,000$ 400,000$ 335,000$ 905,000$

Cash payments:

To suppliers of raw material (40,000) (72,300) (72,700) (185,000)

For direct labor (24,000) (36,800) (24,000) (84,800)

For manufacturing-overhead expenditures (56,000) (76,000) (59,000) (191,000)

For selling and administrative expenses (70,000) (85,000) (75,000) (230,000)

For interest - - (838) (838)Total cash payments (190,000) (270,100) (231,538) (691,638)

Net cash flow from operating activities (20,000)$ 129,900$ 103,462$ 213,362$

Cash flows from investing activities:

Purchase of equipment - (143,700) (48,300) (192,000)

Net cash used by investing activities -$ (143,700)$ (48,300)$ (192,000)$

Cash flows from financing activities:

Payment of dividends (25,000) - - (25,000)

Principle of bank loan 35,000 13,800 - 48,800

Repayment of bank loan - - (48,800) (48,800)

Net cash provided by financing activit ies 10,000$ 13,800$ (48,800)$ -$

Net increase in cash (10,000)$ -$ 6,362$ (3,638)$

Balance in cash, beginning 40,000 30,000 30,000 40,000

Balance in cash. end of month 30,000$ 30,000$ 36,362$ 36,362$ 9-57

budget


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Budgeted Balance Sheet

Breakers reports the following account balances onJune 30 prior to preparing its budgeted financial

statements:

Land - $50,000Building (net) - $148,000

Common stock - $217,000

Retained earnings - $46,400

9-58

Account balances for property, plant and equipment and stockholders equity

accounts are needed before preparing the budgeted balance sheet.


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The budgeted balance sheet is prepared for the date June 30.


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Cash is taken from the cash budget or the budgetedstatement of cash flows.

Accounts receivable is 25% of June sales.

(Recall the collections pattern from the cash collectionsschedule.)

The raw materials, work-in-process and finished goodsinventory amounts can be taken from the cost of goodsmanufactured and costs of goods sold schedules.

The amount for equipment can be taken from the cashdisbursements budget or the budgeted statement of cashflows.

The accounts payable balance is 50% of Junes purchases fordirect materials.

(Recall the cash disbursements pattern for direct materials.)

The ending retained balance is the beginning balance plus netincome less dividends paid

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Budgeted Income

Statement

Cash Budget

Sales of Services or Goods

EndingInventory

BudgetWork in Process

and FinishedGoods

Production

Budget

Direct

MaterialsBudget

Selling and

AdministrativeBudget

Direct

LaborBudget

Overhead

Budget

Ending

InventoryBudgetDirect Materials

Budgeted Balance

SheetBudgeted Statement of

Cash Flows

When the interactions of the elements of

the master budget are expressed as a set of

mathematical relations, it becomes afinancial planning model that can be used to

answer what if questions about unknown

variables.

Documents

Cost Accounting (18)