McGraw-Hill/Irwin
Slide 5C3MASTER BUDGET COMPONENTS
Sales budget
Merchandise Purchases
Prepare financial budgets:
cash income balance sheet
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McGraw-Hill/Irwin
Slide 3
C2
BUDGET COMMITTEE
Top Management
Middle Management
Middle Management
Supervisor Supervisor Supervisor Supervisor
Flow of Budget Data is a bottom-up process.
Budget Process
Promotes analysis and a focus on the future.
Communicates management plans
throughout the organization.
Motivates employees through participation in the budgeting process and the establishment of attainable goals.
delivered quantities.
Safety stock inventory systems that provide protection against lost sales caused by delays in supplier shipments.
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meeting the company’s overall goals.
Provides a benchmark for evaluating performance.
Converts long-term strategic plans into short-term financial
plans.
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Slide 4
C2
BUDGET TIMING
Operating Budget
2009
2010
The annual operating budget may be divided into quarterly
or monthly budgets.
2011
2012
A continuous or rolling budget is a twelve-month budget that rolls forward one month as the current month is completed.
900 $
100 $
90,000
Slide 9
P 1 MERCHANDISE PURCHASES BUDGET
The quantity purchased will be affected by:
Just-in-time inventory systems that enable purchases of smaller, frequently
700 $
100 $ 70,000
October 2009 November 2009 December 2009 Total
1,000 $ 800
1,400 3,200 $
100 $ 100,000
100
80,000
100
140,000
100 $ 320,000
January 2010
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McGraw-Hill/Irwin
Slide 8
P1
SALES BUDGET
HOCKEY DEN Monthly Sales Budget October 2009 – January 2010
September 2009 (actual)
Budgeted Budgeted Budgeted
Unit Sales Unit Price Total Sales
Slide 10
P 1 MERCHANDISE PURCHASES BUDGET
Inventory
Prepare capital expenditure budget
Prepare selling and
general administrative
budgets
Slide 6
P1
SALES BUDGET
Sales Budget
Estimated Unit Sales
Estimated Unit Price
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Slide 2
C2
BUDGET COMMITTEE
Consists of managers from all departments of the organization.
Provides central guidance to insure that individual budgets submitted from all departments are realistic and coordinated.
Analysis of economic and market conditions +
Forecasts of customer needs from marketing personnel
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Slide 7
P1
SALES BUDGET
In September 2009, Hockey Den sold 700 hockey sticks at $100 each. Hockey Den prepared the following sales budget for the next four months:
MASTER BUDGETS AND PLANNING
Chapter 23
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Enhances coordination so that
C1
activities of all units contribute to