1. Homework Due for class next Monday 11/29 Homework: 10-63 (Create cash budget), 10-69, 10-73 Supplemental problem(s) posted to Blackboard Final Exam take-home portion (submitted to digital drop box by 9am)

2. Ch 10 Budgets and Variance Analysis

3. Budgeting Process: Estimate sales Estimate COGS Establish Ending Inventory Amounts

4. Estimate Collection and Payment Patterns Project collections, disbursements, and ending cash Determine borrowing and payments patterns

5. Budget Schedules Cash Collections Inventory Purchases Cash Disbursements for Inventory Cash Disbursements for S&A Cash Budget

6. Example Data OctoberNovember Begin Inv5,00010,000 COGS55,00070,000 Sales60,00070,000 Ending Inv10,000

7. Example (con ’ t) 25% sales collected in current month, remainder following month AR @ Sept 30 = $45,000 50% inventory purchases paid for in current month Remainder following month AP @ Sept 30 = $25,000

8. Example (con ’ t) Monthly salaries: $15,000 Monthly S&A exp.: $1,200 paid as incurred Cash @ Sept 30 = $32,000 Other Cash expenditures: Dividend $2,000 in Oct. Equipment $30,000 in Nov.

9. Example (con ’ t) Credit line of $500,000 Borrowing and repayment in $1,000 increments 12% interest rate Maintain $10,000 bal EOM in checking Begin borrowing balance: $0

10. Variance Analysis Actual Price = AP Actual Quantity = AQ Standard Price = SP Standard Quantity = SQ

11. Variance Analysis (con ’ t) (AP*AQ)-(SP*SQ) = Total Variance Price Variance (AP*AQ)-(AQ*SP)= (AP-SP)*AQ Quantity Variance (AQ*SP)-(SP*SQ)= (AQ-SQ)*SP

12. Variance Analysis (con ’ t) Total Variances: Material, Labor, VOH Each total variance is broken down into price and quantity variances Favorable = Actual less than Standard