PROFIT PLANNING- BUDGETING

 Read pg 376  Organize your business  Determine when you need cash  Baseline to judge how you are doing  RoseBowl article

 Everyone needs to be involved.  Should be created from the bottom up not from the top down  Handout about fraud

 10 Budgets – page 375 Exhibit 9-2  First – Sales – everything based on these #  Last – Balance Sheet

 1)Sales and 2)Cash Receipts  3)Production  Cost of a product: 4)DM,5)Cash Disb, 6)DL, 7)OH  8)Cost of Goods Manufactured: Unit Product Cost - Book has Ending Finishing Goods Inventory –  9)Selling and Administrative  10)Cash  11)Income Statement  12)Balance Sheet

 * Sales in Units – determine by quarter  *x Sales Price  = Total Sales  Information that will cause the change in the entire budget  * information you must enter  Other numbers are calculated

 1 st qtr 2 nd qtr 3 rd qtr4 th qtr TOTAL Sales  1 st qtr Sales 70% 30%  2 nd qtr Sales 70% 30%  3 rd qtr Sales 70% 30%  4 th qtr Sales 70%  TOTAl CASH Rec

 Sales in Units  +* Ending Inventory-FG (% of next quarter)  Total Needs  - Less Beginning FG – last months ending  Required production

 Production in Units  *x Raw materials per unit  = Production Needs  * +Production for E.I. --% of next quarter  Total Needs  -Less Beginning Raw Materials – from last quarter  * X cost per pound  Cost of Raw Materials to be purchased

 1 st qtr 2 nd qtr 3 rd qtr4 th qtr TOTAL purch  1 st qtr Pur 50% 50%  2 nd qtr Pur 50% 50%  3 rd qtr Pur 50% 50%  4 th qtr Pur 50%  TOTAl CASH Dis

 Production in Units  X hours per unit  = DL Hours required  X average rate  =DL $  Use these numbers for overhead driver

 Variable Costs (per unit)  Fixed Costs ( same amount each month)  Estimated OH cost/estimated driver =Predetermined overhead rate  Selling and G&A same structure

 Combines all three product costs  Direct Materials Budget  +Direct Labor Budget  +Overhead Budget  =Total Manufacturing Cost  + Beginning WIP  -Ending WIP  =Cost of Goods Mfg  DON’T USE PAGE 383 IN THE TEXTBOOK.

 Variable Costs (per unit)  Fixed Costs ( same amount each month)

 Beginning Cash  +Cash Receipts Budget  = Total Cash incoming  Cash Disbursement Budget  +Direct Labor Budget  +Overhead Budget  +S G&A Budget  = Total Cash outgoing  Cash incoming – Cash outgoing = Cash excess  -Minimum required balance  = Cash Available

 Sales Budget  -COGS  Beginning FG  +COGM Budget  -Ending FG  Gross Profit  - Selling G&A Budget  = Net Income

 Cash Budget  A/R (Leftovers from Cash Receipts)  Inventory (ending FG)  Net Property,Plant & Equipment (estimate)  =Total Assets  A/P (leftovers from DM budget)  Long Term Liabilities (estimate)  =Total Liabilities  Common Stock (estimate)  Retained Earning (estimated)  +Net Income from Income Statement  = Stockholder’s Equity  =Total Liabilities and Stockholder’s Equity

 See Manufacturing project instructions to create your groups fluid spreadsheet.