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MANAGERIAL ACCOUNTING

Master Budget

Sales Budget
December January February March April May
Unit sales 7000 8000 9200 9900 9700 8500
Unit selling price $ 10 $ 10 $ 10 $ 10 $ 10 $ 10
Total sales revenue $ 70,000 $ 80,000 $ 92,000 $ 99,000 $ 97,000 $ 85,000

Cash Collections Budget


For the Quarter Ended March 31
Month
January February March Quarter
Cash sales $ 24,000 $ 27,600 $ 29,700 $ 81,300
Credit sales $ 49,000 $ 56,000 $ 64,400 $ 169,400
Total cash collections $ 73,000 $ 83,600 $ 94,100 $ 250,700

Production Budget
For the Quarter Ended March 31
Month
January February March Quarter
Unit sales 8000 9200 9900 27100
Plus: Desired ending inventory 2300 2475 2425 2425
Total needed 10300 11675 12325 29525
Less: Beginning inventory 2000 2300 2475 2475
Number of units to produce 8300 9375 9850 27050

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MANAGERIAL ACCOUNTING

Direct Materials Budget


For the Quarter Ended March 31
Month
January February March Quarter
Units to be produced (from Production Budget) 8300 9375 9850 27525
Multiply by: Quantity (pounds) of DM needed per unit 2 2 2 2
Quantity (pounds) of DM needed for production 16600 18750 19700 55050
Plus: Desired ending inventory of DM 1875 1970 1880 1880
Total quantity (pounds) needed 18475 20720 21580 56930
Less: Beginning inventory of DM 1660 1875 1970 1970
Quantity (pounds) to purchase 16815 18845 19610 54960
Multiply by: Cost per pound $ 2 $ 2 $ 2 $ 2
Total cost of DM purchases $ 33,630 $ 37,690 $ 39,220 $ 109,920

April
Unit sales 9700
Plus: Desired ending inventory 2125
Total needed 11825
Less: Beginning inventory 2425
Number of units to produce 9400
DM (pounds) needed per unit 2
DM (pounds) needed for production 18800
Multiply by: Cost per pound $ 2
Total cost of DM purchases $ 37,600

Cash Payments for Direct Material Purchases Budget


For the Quarter Ended March 31

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MANAGERIAL ACCOUNTING

Month
January February March Quarter
20% of current month DM purchases $ 6,726 $ 7,538 $ 7,844 $ 22,108
80% of prior month DM purchases $ 42,400 $ 26,904 $ 30,152 $ 99,456
Total cash payments $ 49,126 $ 34,442 $ 37,996 $ 121,564

Cash Payments for Direct Labor Budget


For the Quarter Ended March 31
Month
January February March Quarter
Total cost of direct labor $ 996 $ 1,125 $ 1,182 $ 3,303

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MANAGERIAL ACCOUNTING

Cash Payments for Manufacturing Overhead Budget


For the Quarter Ended March 31
Month
January February March Quarter
Variable manufacturing overhead costs $ 9,960 $ 11,250 $ 11,820 $ 33,030
Rent (fixed) $ 5,000 $ 5,000 $ 5,000 $ 15,000
Other fixed MOH $ 3,000 $ 3,000 $ 3,000 $ 9,000
Cash payments for manufacturing overhead $ 17,960 $ 19,250 $ 19,820 $ 57,030

Cash Payments for Operating Expenses Budget


For the Quarter Ended March 31
Month
January February March Quarter
Variable operating expenses $ 8,000 $ 9,200 $ 9,900 $ 27,100
Fixed operating expenses $ 1,000 $ 1,000 $ 1,000 $ 3,000
Cash payments for operating expenses $ 9,000 $ 10,200 $ 10,900 $ 30,100

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MANAGERIAL ACCOUNTING

Combined Cash Budget


For the Quarter Ended March 31
Month
January February March Quarter
Beginning cash balance $ 4,500 $ 4,418 $ 4,001 $ 4,500
Plus: Cash collections $ 73,000 $ 83,600 $ 94,100 $ 250,700
Total cash available $ 77,500 $ 88,018 $ 98,101 $ 255,200
Less cash payments:
Direct material purchases $ 49,126 $ 34,442 $ 37,996 $ 121,564
Direct labor $ 996 $ 1,125 $ 1,182 $ 3,303
Manufacturing overhead costs $ 17,960 $ 19,250 $ 19,820 $ 57,030
Operating expenses $ 9,000 $ 10,200 $ 10,900 $ 30,100
Tax payment $ 10,000 $ 10,000
Equipment purchases $ 5,000 $ 12,000 $ 16,000 $ 33,000
Total cash payments $ 82,082 $ 87,017 $ 85,898 $ 254,997
Ending cash balance before financing $ (4,582) $ 1,001 $ 12,203 $ 203
Financing:
Plus: New borrowings $ 9,000 3000 $ 12,000
Less: Debt repayments $ (8,000) $ (8,000)
Less: Interest payments $ 330 $ 330
Total Financing $ 9,000 $ 3,000 $ (7,670) $ 4,330
Ending cash balance $ 4,418 $ 4,001 $ 4,533 $ 4,533

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MANAGERIAL ACCOUNTING

Budgeted Manufacturing Cost per Unit


Direct materials cost per unit $ 4
Direct labor cost per unit $ 0.12
Variable manufacturing overhead costs per unit $ 1.20
Fixed manufacturing overhead costs per unit $ 0.80
Budgeted cost of manufacturing one unit $ 6.12

Budgeted Income Statement


For the Quarter Ended March 31
Sales Revenue $ 271,000
Less: Cost of goods sold $ 165,852
Gross profit $ 105,148
Less: Operating expenses $ 30,100
Less Depreciation expense $ 4,600

Chapter 9: The Master Budget Page 6 of 6

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