Seatwork: Our Budget

Business Name XO Furnitures

Type Manufacturing Business
Product Hand Carved Chairs

We have chosen a manufacturing business which will create

eXtraOrdinary (XO) handcrafted furnitures and sell it to the local
and international market. Furniture industry here in the
Philippines continues to be one of the country's highest export
sales searners. Filipino designs and craftmanship have also
been internaionally recogixe for excellence.

Findings, Realizations & Reflection

Preparing a budget out of scratch was very challenging as you need to make educated
forecasts and assumptions. All must have basis and should be relevant to your budget
schedule.

As we went on our budgeting, you need to adjust every now and then. For example, we
adjusted our selling price since we had a net decrease in the cash flow statement because of
the high cost of raw materials.

We realized that Budgeting is really a step by step process. One will not be able to do the
next budget schedule without preparing the required budget schedule. For an example, we
ought to prepare the Purchases Budget right after completing the Sales Budget, however, we
do not know where to get the units to be produced. In that case, we prepared a Production
Budget first before proceeding in preparing the Purchases Budget.

No budget schedule is more important than the other as all the budget schedules work hand
in hand and are all essential in making sound business decisions.
make educated Research is very important in order to make your budget more accurate and
to your budget justified. This solves the problem of costing the Raw Materials and identifying the
selling price since we do not have any prior basis.

or example, we
One needs patience in budgeting as it can be a very tedious task when numbers
tement because of
do not go as you please. Well, it's accounting anyway.

We also had a hard time in forecasting the sales volume as we do not have any
be able to do the basis. In this case, we had used zero-based budgeting and made a basic
r an example, we assumption on the sales trend.
dget, however, we
ared a Production
dget.

edules work hand

ons.
XO Furnitures using Zero-Based budgeting estimates that it will sell 50 hand carved chairs durin
each of the following months. Each hand carved wooden chairs is

1st Quarter
Janury February March
Sales Volume
50 53 56
Forecast

XO Furnitures
Sales Budget
For the Quarter Ending June 30, 2018
Month April
Sales Volume 59
Selling Price PHP 10,000.00
Sales PHP 590,000.00
sell 50 hand carved chairs during the first month of 2018 with a 5% increase in sales
hand carved wooden chairs is sold for PHP 10,000.00

2nd Quarter 3rd Quarter

April May June July
59 62 66 70

XO Furnitures
Sales Budget
uarter Ending June 30, 2018
May June
62 66
PHP 10,000.00 PHP 10,000.00
PHP 620,000.00 PHP 660,000.00
Product Hand Carved Chairs
Raw Material Log of Wood

In order to prepare a Purchases Budget, we need to know how many hand carved chairs will
be produced. Hence, a Production Budget must be prepared first.

XO Furnitures desires to have 20% of the next month's forecasted sales volume in inventory
at the end of each month. March ending inventory reflects this policy.

XO Furnitures
Production Budget
For the Quarter Ending in June 30, 2018
April May June
Sales 59 62 66
Inventory, ending 13 14 14
Maximum Production 72 76 80
Inventory, beginning 12 13 14
Production Budget 60 63 66

Calculations:
Inventory, beginning
=Sales Volume of Current Month *. 20
Inventory,Ending
=Sales Volume of Next Month * .20
 Each Hand Carved Chair require 1 log of wood (1 cubic meter) which cost PHP 5,000
any hand carved chairs will
to maintain TEN(10) 1-cubic meter logs of wood of monthly ending inventories. Inven
repared first.
met ending of March.

XO Furnitures
sales volume in inventory Production Budget
ects this policy. For the Quarter Ending in June 30, 2018
April May
Production Need 60 63
RM inventory,end 10 10
Max Requirement 70 73
RM inventory,beg 10 10
Raw Materials Budget 60 63
Unit Cost PHP 5,000.00 PHP 5,000.00
RM Purchases Budget PHP 300,000.00 PHP 315,000.00
hich cost PHP 5,000. XO Furnitures is
ing inventories. Inventory policy was

30, 2018
June
66
10
76
10
66
PHP 5,000.00
PHP 330,000.00
 XO Furnitures will pay its craftsmen PHP 2,000 pesos per piece of chair carved

XO Furnitures
Direct Labor Cost Budget
For the Quarter Ending June 30, 2018
April May
Units to be Produced 60 63
Rate per Piece PHP 2,000.00 PHP 2,000.00
Direct Labor Cost Budget PHP 120,000.00 PHP 126,000.00
per piece of chair carved.

2018
June
66
PHP 2,000.00
PHP 132,000.00
 Sources: Sales
Uses: Payment of Purchases Cost;
Payment ofDirect Labor Cost

XO Furnitures
Projected Cash Flow Statement
For the Quarter Ending June 30,2018
Net Cash Flow
Sales (1) P 1,870,000.00
Payment of Direct Labor Cost (2) (378,000.00)
Payment of Purchases Cost (3) (945,000.00)
Net cash inflow 547,000.00
Net increase in cash during the Quarter 547,000.00
Add: Cash balance-Mar 1 350,000.00
CASH BALANCE-END OF JUNE P 897,000.00

(1)
Sales
April PHP 590,000.00
May PHP 620,000.00
June PHP 660,000.00
Total Sales PHP 1,870,000.00

(2)
Direct Labor Cost
April PHP 120,000.00
May PHP 126,000.00
June PHP 132,000.00
Total Direct Labor Cost PHP 378,000.00

(3)
Purchases
April PHP 300,000.00
May PHP 315,000.00
June PHP 330,000.00
Total Purchases PHP 945,000.00