lecture - 19- mgt acc - fall 2010
TRANSCRIPT
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11th EditionChapter 9
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Manufacturing Overhead Budget
At Royal manufacturing overhead is applied tounits of product on the basis of direct laborhours.
The variable manufacturing overhead rate is $20per direct labor hour.
Fixed manufacturing overhead is $50,000 permonth and includes $20,000 of noncash costs
(primarily depreciation of plant assets).
Lets prepare the manufacturing overhead budget.
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Manufacturing Overhead Budget
Direct LaborBudget
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Manufacturing Overhead Budget
Total mfg. OH for quarter $251,000Total labor hours required 5,050
= $49.70 per hour*
*rounded
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Manufacturing Overhead Budget
Depreciation is a noncash charge.
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Production costs per unit Quantity Cost Total
Direct materials 5.00 lbs. 0.40$ 2.00$
Direct labor
Manufacturing overhead
Budgeted finished goods inventory
Ending inventory in units
Unit product cost
Ending finished goods inventory
Ending Finished Goods Inventory Budget
Direct materialsbudget and information
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Production costs per unit Quantity Cost Total
Direct materials 5.00 lbs. 0.40$ 2.00$
Direct labor 0.05 hrs. 10.00$ 0.50
Manufacturing overhead
Budgeted finished goods inventory
Ending inventory in units
Unit product cost
Ending finished goods inventory
Ending Finished Goods Inventory Budget
Direct labor budget
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Production costs per unit Quantity Cost Total
Direct materials 5.00 lbs. 0.40$ 2.00$
Direct labor 0.05 hrs. 10.00$ 0.50
Manufacturing overhead 0.05 hrs. 49.70$ 2.49
4.99$
Budgeted finished goods inventory
Ending inventory in units
Unit product cost 4.99$
Ending finished goods inventory ?
Ending Finished Goods Inventory Budget
Total mfg. OH for quarter $251,000Total labor hours required 5,050
= $49.70 per hour*
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Production costs per unit Quantity Cost Total
Direct materials 5.00 lbs. 0.40$ 2.00$
Direct labor 0.05 hrs. 10.00$ 0.50
Manufacturing overhead 0.05 hrs. 49.70$ 2.49
4.99$
Budgeted finished goods inventory
Ending inventory in units 5,000
Unit product cost 4.99$
Ending finished goods inventory 24,950$
Ending Finished Goods Inventory Budget
Production Budget
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Selling and Administrative Expense Budget
At Royal, the selling and administrative expensesbudget is divided into variable and fixed components.
The variable selling and administrative expenses are$0.50 per unit sold.
Fixed selling and administrative expenses are $70,000per 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 administrativeexpense budget.
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Selling and Administrative Expense Budget
Calculate the selling and administrativecash expenses for the quarter.
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Quick Check
What are the total cash disbursements for sellingand administrative expenses for the quarter?
a. $180,000
b. $230,000
c. $110,000
d. $ 70,000
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What are the total cash disbursements for sellingand administrative expenses for the quarter?
a. $180,000
b. $230,000
c. $110,000
d. $ 70,000
Quick Check
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Selling and Administrative Expense Budget
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Format of the Cash Budget
The cash budget is divided into four sections:
1. Cash receipts listing all cash inflows excludingborrowing
2. Cash disbursements listing all paymentsexcluding repayments of principal and interest
3. Cash excess or deficiency
4. The financing section listing all borrowings,repayments and interest
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The Cash Budget
Royal:Maintains a 16% open line of credit for $75,000
Maintains a minimum cash balance of $30,000
Borrows on the first day of the month and repaysloans on the last day of the month
Pays a cash dividend of $49,000 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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The Cash Budget
Schedule of ExpectedCash Collections
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The Cash Budget
Direct LaborBudget
Manufacturing
Overhead Budget
Selling and AdministrativeExpense Budget
Schedule of ExpectedCash Disbursements
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The Cash Budget
Because Royal maintainsa cash balance of $30,000,
the company must borrow$50,000 on it line-of-credit.
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The Cash Budget
Ending cash balance for Aprilis the beginning May balance.
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Quick Check
What is the excess (deficiency) of cash availableover disbursements for June?
a. $ 85,000
b. $(10,000)
c. $ 75,000
d. $ 95,000
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What is the excess (deficiency) of cash availableover disbursements for June?
a. $ 85,000
b. $(10,000)
c. $ 75,000
d. $ 95,000
Quick Check
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The Cash Budget
$50,000 16% 3/12 = $2,000Borrowings on April 1 and
repayment on June 30.
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International Aspects of Budgeting
When a multinational company enters into thebudgeting process there are at least threemajor problems that must be dealt with . . .
1. Fluctuations in foreign currencyexchange rates.
2. High inflation rates.
3. Local economic conditions andgovernmental policies.
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End of Chapter 9