LT 10 Budget Hilton's Ex
LT 10 Budget Hilton's Ex
BUDGETING
Practice Exercises from Hiltons book
Lt 10
By
Anna Rowe
[email protected]
Sales Budget
Breakers,
Breakers, Inc.
Inc. is
is preparing
preparing budgets
budgets for
for the
the
quarter
quarter ending
ending June
June 30.
30.
Budgeted
Budgeted sales
sales for
for the
the next
next five
five months
months are:
are:
April
April
May
May
June
June
July
July
August
August
20,000
20,000 units
units
50,000
50,000 units
units
30,000
30,000 units
units
25,000
25,000 units
units
15,000
15,000 units.
units.
The
The selling
selling price
price is
is $10
$10 per
per unit.
unit.
CRICOS Provider Code 00301J
Sales Budget
Budgeted
Budgeted
sales
sales (units)
(units)
Selling
Selling price
price
per
per unit
unit
Total
Total
Revenue
Revenue
$$
April
April
May
May
June
June
20,000
20,000
50,000
50,000
30,000
30,000
10
10
$$200,000
200,000
$$
10
10
$$500,000
500,000
$$
10
10
$$300,000
300,000
Quarter
Quarter
100,000
100,000
$$
10
10
$$1,000,000
1,000,000
Production Budget
Sales
Budget
ed
t
e
pl
m
o
C
Production
Budget
Production Budget
The
The management
management of
of Breakers,
Breakers, Inc.
Inc. wants
wants
ending
ending inventory
inventory to
to be
be equal
equal to
to 20%
20% of
of the
the
following
following months
months budgeted
budgeted sales
sales in
in units.
units.
On
On March
March 31,
31, 4,000
4,000 units
units were
were on
on hand.
hand.
Lets
Lets prepare
prepare the
the production
production budget.
budget.
Production Budget
Sales
Salesin
inunits
units
Add:
Add: desired
desired
end.
end. inventory
inventory
Total
Totalneeded
needed
Less:
Less: beg.
beg.
inventory
inventory
Units
Unitsto
tobe
be
started
started
April
April
20,000
20,000
From sales
budget
CRICOS Provider Code 00301J
May
May
June
June
Quarter
Quarter
Production Budget
Sales
Salesin
inunits
units
Add:
Add: desired
desired
end.
end. inventory
inventory
Total
Totalneeded
needed
Less:
Less: beg.
beg.
inventory
inventory
Units
Unitsto
tobe
be
started
started
April
April
20,000
20,000
10,000
10,000
30,000
30,000
May
May
June
June
Quarter
Quarter
Production Budget
Sales
Salesin
inunits
units
Add:
Add: desired
desired
end.
end. inventory
inventory
Total
Totalneeded
needed
Less:
Less: beg.
beg.
inventory
inventory
Units
Unitsto
tobe
be
started
started
April
April
20,000
20,000
May
May
June
June
10,000
10,000
30,000
30,000
4,000
4,000
26,000
26,000
March 31
ending inventory
CRICOS Provider Code 00301J
Quarter
Quarter
Production Budget
Sales
Salesin
inunits
units
Add:
Add: desired
desired
end.
end. inventory
inventory
Total
Totalneeded
needed
Less:
Less: beg.
beg.
inventory
inventory
Units
Unitsto
tobe
be
started
started
April
April
20,000
20,000
May
May
50,000
50,000
10,000
10,000
30,000
30,000
6,000
6,000
56,000
56,000
4,000
4,000
10,000
10,000
26,000
26,000
46,000
46,000
June
June
Quarter
Quarter
Production Budget
Sales
Salesin
inunits
units
Add:
Add: desired
desired
end.
end. inventory
inventory
Total
Totalneeded
needed
Less:
Less: beg.
beg.
inventory
inventory
Units
Unitsto
tobe
be
started
started
April
April
20,000
20,000
May
May
50,000
50,000
June
June
30,000
30,000
Quarter
Quarter
100,000
100,000
10,000
10,000
30,000
30,000
6,000
6,000
56,000
56,000
5,000
5,000
35,000
35,000
5,000
5,000
105,000
105,000
4,000
4,000
10,000
10,000
6,000
6,000
4,000
4,000
26,000
26,000
46,000
46,000
29,000
29,000
101,000
101,000
Direct-Material Budget
At
At Breakers,
Breakers, five
five pounds
pounds of
of material
material are
are
required
required per
per unit
unit of
of product.
product.
Management
Management wants
wants materials
materials on
on hand
hand at
at the
the
end
end of
of each
each month
month equal
equal to
to 10%
10% of
of the
the
following
following months
months production.
production.
On
On March
March 31,
31, 13,000
13,000 pounds
pounds of
of material
material are
are on
on
hand.
hand. Material
Material cost
cost $.40
$.40 per
per pound.
pound.
Lets
Lets prepare
prepare the
the direct
direct materials
materials budget.
budget.
CRICOS Provider Code 00301J
Direct-Material Budget
From our
production
budget
Direct-Material Budget
Direct-Material Budget
March 31
inventory
CRICOS Provider Code 00301J
Direct-Material Budget
Direct-Material Budget
July
July Production
Production
Sales
Salesin
in units
units
Add:
Add:desired
desired ending
ending inventory
inventory
Total
Total units
unitsneeded
needed
Less:
Less:beginning
beginning inventory
inventory
Production
Production in
in units
units
25,000
25,000
3,000
3,000
28,000
28,000
5,000
5,000
23,000
23,000
Direct-Labor Budget
At
At Breakers,
Breakers, each
each unit
unit of
of product
product requires
requires 0.1
0.1 hours
hours
of
of direct
direct labor.
labor.
The
The Company
Company has
has aa no
no layoff
layoff policy
policy so
so all
all
employees
employees will
will be
be paid
paid for
for 40
40 hours
hours of
of work
work each
each
week.
week.
In
In exchange
exchange for
for the
the no
no layoff
layoff policy,
policy, workers
workers agreed
agreed
to
to aa wage
wage rate
rate of
of $8
$8 per
per hour
hour regardless
regardless of
of the
the hours
hours
worked
worked (No
(No overtime
overtime pay).
pay).
For
For the
the next
next three
three months,
months, the
the direct
direct labor
labor workforce
workforce
will
will be
be paid
paid for
for aa minimum
minimum of
of 3,000
3,000 hours
hours per
per month.
month.
Lets
Lets prepare
prepare the
the direct
direct labor
labor budget.
budget.
CRICOS Provider Code 00301J
Direct-Labor Budget
From our
production
budget
CRICOS Provider Code 00301J
Direct-Labor Budget
Direct-Labor Budget
Direct-Labor Budget
Overhead Budget
Here is Breakers Overhead Budget for the quarter.
From our
Sales budget
At
At Breakers,
Breakers, all
all sales
sales are
are on
on account.
account.
The
The companys
companys collection
collection pattern
pattern is:
is:
70%
70% collected
collected in
in the
the month
month of
of sale,
sale,
25%
25% collected
collected in
in the
the month
month following
following sale,
sale,
5%
5% is
is uncollected.
uncollected.
The
The March
March 31
31 accounts
accounts receivable
receivable
balance
balance of
of $30,000
$30,000 will
will be
be collected
collected in
in full.
full.
From our
Overhead Budget
From our
Selling and Administrative
Expense Budget
To maintain a cash
balance of $30,000,
Breakers must borrow
$35,000 on its line of credit.
Breakers must
borrow an
addition $13,800
to maintain a
cash balance
of $30,000.
pl
ed
t
e
Budgeted
Income
Statement
Quantity
Quantity
5.00
5.00 lbs.
lbs.
0.10
0.10 hrs.
hrs.
0.10
0.10 hrs.
hrs.
Budgeted
Budgetedfinished
finishedgoods
goodsinventory
inventory
Ending
Endinginventory
inventory in
inunits
units
Unit
Unitproduct
productcost
cost
Ending
Endingfinished
finishedgoods
goodsinventory
inventory
Cost
Cost
$$ 0.40
0.40
$$ 8.00
8.00
$$18.02
18.02
Total
Total
$$ 2.00
2.00
0.80
0.80
1.80
1.80
$$ 4.60
4.60
5,000
5,000
$$ 4.60
4.60
$$23,000
23,000
*rounded
$$ 1,000,000
1,000,000
460,000
460,000
540,000
540,000
$$ 260,000
260,000
838
838
$$
260,838
260,838
279,162
279,162
25%of June
sales of
$300,000
11,500 lbs. at
$.40 per lb.
5,000 units at
$4.60 per unit.
50% of June
purchases
of $56,800
Good Evening