Profit Planning,Activity-Based Budgeting and e-Budgeting

1. Profit Planning, Activity-Based Budgeting and e-Budgeting 9 Chapter Nine

3. 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)

4. Types of Budgets Detail Budget Detail Budget Detail Budget Master Budget Covering all phases of a company’s operations. Sales Production Materials

5. 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.

6. Direct Materials Budget Sales of Services or Goods Ending Inventory Budget Work in Process and Finished Goods Production Budget Selling and Administrative Budget Direct Labor Budget Overhead Budget Ending Inventory Budget Direct Materials

7. Budgeted Financial Statements Direct Materials Budget Cash Budget Sales of Services or Goods Ending Inventory Budget Work in Process and Finished Goods Production Budget Selling and Administrative Budget Direct Labor Budget Overhead Budget Ending Inventory Budget Direct Materials Exh. 9-1

9. Sales Budget

10. Production Budget Completed Production must be adequate to meet budgeted sales and provide for sufficient ending inventory. Sales Budget Production Budget

12. Production Budget From sales budget

13. Production Budget

14. Production Budget March 31 ending inventory

15. Production Budget

16. Production Budget

18. Direct-Material Budget From our production budget

19. Direct-Material Budget 10% of the following month’s production

20. Direct-Material Budget March 31 inventory

21. Direct-Material Budget

22. Direct-Material Budget

24. Direct-Labor Budget From our production budget

25. Direct-Labor Budget

26. Direct-Labor Budget This is the greater of labor hours required or labor hours guaranteed.

27. Direct-Labor Budget

30. Selling and Administrative Expense Budget From our Sales budget

31. Selling and Administrative Expense Budget

32. Selling and Administrative Expense Budget

34. Cash Receipts Budget

35. Cash Receipts Budget

37. Cash Disbursement Budget 140,000 lbs. × $.40/lb. = $56,000

38. Cash Disbursement Budget

40. Cash Disbursement Budget Continued From our Cash Receipts Budget

41. Cash Disbursement Budget Continued From our Cash Disbursements Budget

42. Cash Disbursement Budget Continued From our Direct Labor Budget

43. Cash Disbursement Budget Continued From our Overhead Budget

44. Cash Disbursement Budget Continued From our Selling and Administrative Expense Budget

45. Cash Disbursement Budget Continued To maintain a cash balance of $30,000, Breakers must borrow $35,000 on its line of credit.

46. Cash Disbursement Budget Financing and Repayment Ending cash balance for April is the beginning May balance.

47. Cash Disbursement Budget Continued Breakers must borrow an addition $13,800 to maintain a cash balance of $30,000.

48. Cash Disbursement Budget Financing and Repayment

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

50. Cash Disbursement Budget Financing and Repayment

51. Cash Disbursement Budget Continued

52. Cash Disbursement Budget Financing and Repayment

53. Budgeted Income Statement Completed After we complete the cash budget, we can prepare the budgeted income statement for Breakers. Cash Budget Budgeted Income Statement

54. Budgeted Ending Inventory * rounded Manufacturing overhead is applied on the basis of direct labor hours. Total overhead $191,000 Total labor hours 10,600 hrs. = $18.02 per hr. *

55. Budgeted Income Statement

57. 25%of June sales of $300,000 11,500 lbs. at $.40 per lb. 5,000 units at $4.60 per unit.

58. 50% of June purchases of $56,800

64. Budgeting Product Life-Cycle Costs Product planning and concept Design. Preliminary design. Detailed design and testing. Production. Distribution and customer service.

66. Participative Budgeting Flow of Budget Data

67. End of Chapter 9