Exh. 23-6
September 2008 (actual) October 2008 November 2008 December 2008 Total January 2009
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Budgeted Budgeted Unit Price Total Sales $ 100 $ 70,000 100 $ 100 100 100 $ 100 $ 100,000 80,000 140,000 320,000 90,000
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Analytical Learning Objectives
A1: Analyze expense planning using activity-based budgeting
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Advantages
Coordinates business activities
Motivates employees
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Provides a basis for evaluating performance against past or expected results© The McGraw-Hill Companies, Inc., 2007
Supervisor
Flow of Budget Data is a bottom-up process.
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C2
Budget Timing
Operating Budget
2007
2008
Exh. 23-8
Next month's unit sales Ending inventory percentage Budgeted ending inventory units Add current month's unit sales Total units needed Deduct beginning inventory units Number of units to be purchased Budgeted cost per unit Budgeted cost of purchases
HOCKEY DEN Merchandise Purchases Budget October 2008 – December 2008
Exh. 23-8
Next month's unit sales Ending inventory percentage Budgeted ending inventory units Add current month's unit sales Total units needed Deduct beginning inventory units Number of units to be purchased Budgeted cost per unit Budgeted cost of purchases
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C1
Budget Process
Defines goals and objectives
Communicates plans and instructions Promotes analysis and a focus on the future
P1
Merchandise Purchases Budget
HOCKEY DEN Merchandise Purchases Budget October 2008 – December 2008
Exh. 23-8
Next month's unit sales Ending inventory percentage Budgeted ending inventory units Add current month's unit sales Total units needed Deduct beginning inventory units Number of units to be purchased Budgeted cost per unit Budgeted cost of purchases
October 800 × 90% 720
November 1,400 × 90% 1,260
December 900 × 90% 810
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P1
Merchandise Purchases Budget
Safety stock inventory systems that provide protection against lost sales caused by delays in supplier shipments.
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Let’s prepare the purchases budget for Hockey Den.
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P1
Merchandise Purchases Budget
HOCKEY DEN Merchandise Purchases Budget October 2008 – December 2008
Continuous or Rolling Budget
2005
2006
2007
2008
The budget may be a twelve-month budget that rolls forward one month as the current month is completed.
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October 800 × 90% 720 1,000 1,720
November 1,400 × 90% 1,260 800 2,060
Hale Waihona Puke December 900 × 90% 810 1,400 2,210
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P1
Sales Budget
In September 2008, Hockey Den sold 700 hockey sticks at $100 each. Hockey Den prepared the following sales budget for the next four months:
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C2
Budget Committee
Top Management
Middle Management
Middle Management
Supervisor
Supervisor
Supervisor
Hockey Den buys hockey sticks for $60.00 each and maintains an ending inventory equal to 90 percent of the next month’s budgeted sales. 900 hockey sticks are on hand on September 30.
Sales Budget
Estimated Unit Sales Estimated Unit Price
Analysis of economic and market conditions
+
Forecasts of customer needs from marketing personnel
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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.
Chapter 23
Master Budgets and Planning
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Conceptual Learning Objectives
C1: Describe the importance and benefits of budgeting C2: Explain the process of budget administration C3: Describe a master budget and the process of preparing it
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P1
Sales Budget