Financial Planning & Budgeting Using Excel 2007: Computer Infinity (PVT.) LTD Karachi Branch Council 2009 - ICMAP

Download as pptx, pdf, or txt
Download as pptx, pdf, or txt
You are on page 1of 66

Financial Planning & Budgeting Using Excel 2007

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Budgeting:
Budgeting: The
The Basis
Basis for
for
Planning
Planning and
and Control
Control
A
Abudget
budget isis aa comprehensive
comprehensive financial
financial
plan
plan for
for achieving
achieving thethe financial
financial and
and
operational
operational goals
goals of
of an
an organization.
organization.

Planning Control
Developing Steps taken by
objectives for management to
acquisition ensure that
and use of objectives are
resources. attained.
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Benefits
Benefits Derived
Derived from
from Budgeting
Budgeting
Enhanced managerial
responsibility

Coordination Performance
of activities Benefits evaluation

Assignment of decision
making responsibilities

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Establishing
Establishing Budgeted
Budgeted Amounts:
Amounts:
The
The “Behavioral”
“Behavioral” Approach
Approach
Budget Problems Solution
 Perceived unfair or  Reasonable and
unrealistic goals. achievable budgets.
 Poor management-  Employee participation
employee in budgeting process.
communications.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Participation
Participation in
in Budget
Budget Process
Process

Top M anagem ent

M id d le M id d le
M anagem ent M anagem ent

S u p e r v is o r S u p e r v is o r S u p e r v is o r S u p e r v is o r

Flow of Budget Data

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budget
Budget Period
Period
The annual operating budget may be
divided into quarterly or monthly budgets.

2001 2002 2003 2004


Capital Budgets

A continuous budget is usually a twelve-month budget


that adds one month as the current month is completed.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Master
Master Budget
Budget

Cost of goods
Sales Production sold and ending
forecast schedule inventory
budgets

Budgeted
financial Capital Operating
budgets: expenditures expense
 cash
budget budgets
 income
 balance sheet

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Preparing
Preparing the
the Master
Master Budget:
Budget:
An
An Illustration
Illustration
That’s enough talking
about budgets, now
show me an example!

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Preparing
Preparing the
the Master
Master Budget:
Budget:
An
An Illustration
Illustration
Sales
Budget

Estimated Estimated
Unit Sales Unit Price

Analysis of economic and market conditions


+
Forecasts of customer needs from marketing personnel
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Preparing
Preparing the
the Master
Master Budget:
Budget:
An
An Illustration
Illustration
Ellis Magnet Co. is preparing budgets for the quarter
ending June 30. The sales price is $10 per magnet.
Budgeted sales for the next four months are:
April 20,000 magnets @ $10 = $200,000
May 50,000 magnets @ $10 = $500,000
June 30,000 magnets @ $10 = $300,000
July 25,000 magnets @ $10 = $250,000

The Sales Budget


July is needed for June ending inventory computations.
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget

Sales Production
Budget Budget

t ed
e
pl
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Ellis wants ending inventory
to be 20 percent of the next month’s
budgeted sales in units.

4,000 units were on hand March 31.

Let’s prepare the production budget.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Production
Production must
must be
be adequate
adequate to
to meet
meet
budgeted
budgeted sales
sales and
and to
to provide
provide sufficient
sufficient
ending
ending inventory.
inventory.
Budgeted product sales in units
+ Desired product units in ending inventory
= Total product units needed
– Product units in beginning inventory
= Product units to produce

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
April Ma y June
Budge te d unit sa le s 20,000 50,000 30,000
De sire d e nding inve ntory
Tota l units nee de d
Less be ginning inve ntory
Units to produce

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
April Ma y June
Budge te d unit sa le s 20,000 50,000 30,000
De sire d e nding inve ntory 10,000 6,000 5,000
Tota l units nee de d 30,000 56,000 35,000
Less be ginning inve ntory
Units to produce

Ending inve ntory = 20% of ne x t month's production ne e ds.


June e nding inve ntory = .20 × 25,000 July units = 5,000 units.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
April Ma y June
Budge te d unit sa le s 20,000 50,000 30,000
De sire d e nding inve ntory 10,000 6,000 5,000
Tota l units nee de d 30,000 56,000 35,000
Less be ginning inve ntory 4,000 10,000 6,000
Units to produce 26,000 46,000 29,000

Ending inve ntory = 20% of ne x t month's production ne e ds.


June e nding inve ntory = .20 × 25,000 July units = 5,000 units.
Be ginning inve ntory is la st m onth's e nding inve ntory.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget

Production Production
Budget Budget
Units Material
t ed Purchases
e
pl
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Material
Material Purchases
Purchases
The
The material
material purchases
purchases budget
budget isis based
based on
on
production
production quantity
quantity and
and desired
desired material
material
inventory
inventory levels.
levels.
Units to produce
× Material needed per unit
= Material needed for units to produce
+ Desired units of material in ending inventory
= Total units of material needed
– Units of material in beginning inventory
= Units of material to purchase
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Material
Material Purchases
Purchases
Five
Five pounds
pounds of of material
material are
are needed
needed forfor each
each
unit
unit produced.
produced.
Ellis
Ellis wants
wants toto have
have materials
materials onon hand
hand at at the
the
end
end ofof each
each month
month equal
equal to
to 10
10 percent
percent of of
the
the following
following month’s
month’s production
production needs.
needs.
The
The materials
materials inventory
inventory on
on March
March 31 31 is
is
13,000
13,000 pounds.
pounds. July
July production
production is is
budgeted
budgeted for
for 23,000
23,000 units.
units.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Material
Material Purchases
Purchases
April May June
Units to produce 26,000 46,000 29,000
Pounds per unit 5 5 5
Ma terial ne eds (lbs.) 130,000 230,000 145,000
Desire d ending inve ntory
Total m ate rial nee ds (lbs.)
Less beginning inve ntory
Ma terial purchases (lbs.)

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Material
Material Purchases
Purchases
April May June
Units to produce 26,000 46,000 29,000
Pounds per unit 5 5 5
Ma terial ne eds (lbs.) 130,000 230,000 145,000
Desire d ending inve ntory 23,000 14,500 11,500
Total m ate rial nee ds (lbs.) 153,000 244,500 156,500
Less beginning inve ntory
Ma terial purchases (lbs.)

Ending inventory = 10% of ne x t month's ma terial nee ds.


June ending inventory = .10 × (23,000 units × 5 lbs. pe r unit).
June ending inventory = 11,500 lbs.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Material
Material Purchases
Purchases
April May June
Units to produce 26,000 46,000 29,000
Pounds per unit 5 5 5
Ma terial ne eds (lbs.) 130,000 230,000 145,000
Desire d ending inve ntory 23,000 14,500 11,500
Total m ate rial nee ds (lbs.) 153,000 244,500 156,500
Less beginning inve ntory 13,000 23,000 14,500
Ma terial purchases (lbs.) 140,000 221,500 142,000

Ending inventory = 10% of ne x t month's ma terial nee ds.


June ending inventory = .10 × (23,000 units × 5 lbs. pe r unit).
June ending inventory = 11,500 lbs.
Beginning inve ntory is la st m onth's e nding inventory.
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Material
Material Purchases
Purchases
Materials
Materials used
used inin production
production cost cost $.40
$.40
per
per pound.
pound. One-half
One-half of of aa month’s
month’s
purchases
purchases areare paid
paid for
for in
in the
the month
month of of
purchase;
purchase; the
the other
other half
half isis paid
paid for
for in
in the
the
following
following month.
month.
No
No discount
discount terms
terms are
are available.
available.
The
The accounts
accounts payable
payable balance
balance on
on
March
March 31
31 is
is $12,000.
$12,000.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Material
Material Purchases
Purchases
April Ma y June
Ma te ria l purcha se s (lbs.) 140,000 221,500 142,000
Cost pe r pound $ 0.40 $ 0.40 $ 0.40
Tota l cost $ 56,000 $ 88,600 $ 56,800
Pa ya ble s from Ma rch $ 12,000
April purcha se s
Ma y purcha se s
June purcha se s
Tota l pa ym e nts in m onth

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Material
Material Purchases
Purchases
April Ma y June
Ma te ria l purcha se s (lbs.) 140,000 221,500 142,000
Cost pe r pound $ 0.40 $ 0.40 $ 0.40
Tota l cost $ 56,000 $ 88,600 $ 56,800
Pa ya ble s from Ma rch $ 12,000
April purcha se s 28,000 $ 28,000
Ma y purcha se s
June purcha se s
Tota l pa ym e nts in m onth

½ × $56,000 = $28,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Material
Material Purchases
Purchases
April Ma y June
Ma te ria l purcha se s (lbs.) 140,000 221,500 142,000
Cost pe r pound $ 0.40 $ 0.40 $ 0.40
Tota l cost $ 56,000 $ 88,600 $ 56,800
Pa ya ble s from Ma rch $ 12,000
April purcha se s 28,000 $ 28,000
Ma y purcha se s 44,300 $ 44,300
June purcha se s
Tota l pa ym e nts in m onth

½ × $56,000 = $28,000
½ × $88,600 = $44,300

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Material
Material Purchases
Purchases
April Ma y June
Ma te ria l purcha se s (lbs.) 140,000 221,500 142,000
Cost pe r pound $ 0.40 $ 0.40 $ 0.40
Tota l cost $ 56,000 $ 88,600 $ 56,800
Pa ya ble s from Ma rch $ 12,000
April purcha se s 28,000 $ 28,000
Ma y purcha se s 44,300 $ 44,300
June purcha se s 28,400
Tota l pa ym e nts in m onth $ 40,000 $ 72,300 $ 72,700

½ × $56,000 = $28,000
½ × $88,600 = $44,300
½ × $56,800 = $28,400
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget

Production Production
Budget Budget
Units Labor
Material d
e
l et
p
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Direct
Direct Labor
Labor
Each unit produced requires 3 minutes (.05
hours) of direct labor. Ellis employs 30
persons for 40 hours each week at a rate of
$10 per hour. Any extra hours needed are
obtained by hiring temporary workers also
at $10 per hour.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Direct
Direct Labor
Labor
April May June
Units to produce 26,000 46,000 29,000
Hours per unit 0.05 0.05 0.05
Tota l hours require d 1,300 2,300 1,450
W a ge ra te pe r hour
Direct labor cost

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Direct
Direct Labor
Labor
April May June
Units to produce 26,000 46,000 29,000
Hours per unit 0.05 0.05 0.05
Tota l hours require d 1,300 2,300 1,450
W a ge ra te pe r hour $ 10 $ 10 $ 10
Direct labor cost $ 13,000 $ 23,000 $ 14,500

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget

Production Production
Budget Budget
Units Manufacturing
Material Overhead
Labor ted
e
pl
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Production
Production Budget
Budget
Manufacturing
Manufacturing Overhead
Overhead
Variable manufacturing overhead is $1 per
unit produced and fixed manufacturing
overhead is $50,000 per month.
Fixed manufacturing overhead includes
$20,000 in depreciation which does not
require a cash outflow.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Manufacturing
Manufacturing Overhead
Overhead
April Ma y June
Units to produce 26,000 46,000 29,000
Va riable ove rhea d rate $ 1.00 $ 1.00 $ 1.00
Va riable ove rhea d cost $ 26,000 $ 46,000 $ 29,000
Fix ed overhead
Total mfg. overhead cost
De duct depreciation
Ma nufacturing overhea d - ca sh

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Manufacturing
Manufacturing Overhead
Overhead
April Ma y June
Units to produce 26,000 46,000 29,000
Va riable ove rhea d rate $ 1.00 $ 1.00 $ 1.00
Va riable ove rhea d cost $ 26,000 $ 46,000 $ 29,000
Fix ed overhead 50,000 50,000 50,000
Total mfg. overhead cost $ 76,000 $ 96,000 $ 79,000
De duct depreciation
Ma nufacturing overhea d - ca sh

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
Manufacturing
Manufacturing Overhead
Overhead
April Ma y June
Units to produce 26,000 46,000 29,000
Va riable ove rhea d rate $ 1.00 $ 1.00 $ 1.00
Va riable ove rhea d cost $ 26,000 $ 46,000 $ 29,000
Fix ed overhead 50,000 50,000 50,000
Total mfg. overhead cost $ 76,000 $ 96,000 $ 79,000
De duct depreciation 20,000 20,000 20,000
Ma nufacturing overhea d - ca sh $ 56,000 $ 76,000 $ 59,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Selling
Selling and
and Administrative
Administrative
(S&A)
(S&A) Expense
Expense Budget
Budget

Production Selling
Budget and
Administrative
ed Expense
e t
pl Budget
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Selling
Selling and
and Administrative
Administrative
(S&A)
(S&A) Expense
Expense Budget
Budget
 Selling expense budgets contain both
variable and fixed items.
 Variable items: shipping costs and sales
commissions.
 Fixed items: advertising and sales salaries.
 Administrative expense budgets contain
mostly fixed items.
 Executive salaries and depreciation on company
offices.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
(S&A)
(S&A) Expenses
Expenses
Variable selling and administrative
expenses are $.50 per unit sold and fixed
selling and administrative expenses are
$70,000 per month.
Fixed selling and administrative expenses
include $10,000 in depreciation which does
not require a cash outflow.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
(S&A)
(S&A) Expenses
Expenses
April Ma y June
Budgete d unit sa le s 20,000 50,000 30,000
Va riable S&A per unit $ 0.50 $ 0.50 $ 0.50
Va riable S&A e xpense $ 10,000 $ 25,000 $ 15,000
Fix e d S&A e x pense 70,000 70,000 70,000
Tota l S&A e xpense $ 80,000 $ 95,000 $ 85,000
De duct de pre ciation
S&A ex pense - ca sh

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Payments
Payments for
for
(S&A)
(S&A) Expenses
Expenses
April Ma y June
Budgete d unit sa le s 20,000 50,000 30,000
Va riable S&A per unit $ 0.50 $ 0.50 $ 0.50
Va riable S&A e xpense $ 10,000 $ 25,000 $ 15,000
Fix e d S&A e x pense 70,000 70,000 70,000
Tota l S&A e xpense $ 80,000 $ 95,000 $ 85,000
De duct de pre ciation 10,000 10,000 10,000
S&A ex pense - ca sh $ 70,000 $ 85,000 $ 75,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
I have seen a lot of cash
payments but no cash
receipts. Show me some
cash receipts!

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
All
All sales
sales are
are on
on account.
account.
Ellis’s
Ellis’s collection
collection pattern
pattern is:
is:
70
70 percent
percent collected
collected in
in month
month of
of sale
sale
25
25 percent
percent collected
collected in
in month
month after
after sale
sale
55 percent
percent will
will be
be uncollectible
uncollectible
Accounts
Accounts receivable
receivable onon March
March 3131 is
is
$30,000,
$30,000, all
all of
of which
which is
is collectible.
collectible.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
April Ma y June
Budgeted unit sa le s 20,000 50,000 30,000
Price per unit $ 10 $ 10 $ 10
Budgeted sales re ve nue $ 200,000 $ 500,000 $ 300,000
Receipts from Ma rch sa le s $ 30,000
Receipts from April sale s
Receipts from Ma y sa le s
Receipts from June sa le s
Total cash re ce ipts

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
April Ma y June
Budgeted unit sa le s 20,000 50,000 30,000
Price per unit $ 10 $ 10 $ 10
Budgeted sales re ve nue $ 200,000 $ 500,000 $ 300,000
Receipts from Ma rch sa le s $ 30,000
Receipts from April sale s 140,000 $ 50,000
Receipts from Ma y sa le s
Receipts from June sa le s
Total cash re ce ipts $ 170,000

April: .70 × $200,000 = $140,000 a nd .25 × $200,000 = $50,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
April Ma y June
Budgeted unit sa le s 20,000 50,000 30,000
Price per unit $ 10 $ 10 $ 10
Budgeted sales re ve nue $ 200,000 $ 500,000 $ 300,000
Receipts from Ma rch sa le s $ 30,000
Receipts from April sale s 140,000 $ 50,000
Receipts from Ma y sa le s 350,000 $ 125,000
Receipts from June sa le s
Total cash re ce ipts $ 170,000 $ 400,000

April: .70 × $200,000 = $140,000 a nd .25 × $200,000 = $50,000


May: .70 × $500,000 = $350,000 a nd .25 × $500,000 = $125,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Cash
Cash Receipts
Receipts Budget
Budget
April Ma y June
Budgeted unit sa le s 20,000 50,000 30,000
Price per unit $ 10 $ 10 $ 10
Budgeted sales re ve nue $ 200,000 $ 500,000 $ 300,000
Receipts from Ma rch sa le s $ 30,000
Receipts from April sale s 140,000 $ 50,000
Receipts from Ma y sa le s 350,000 $ 125,000
Receipts from June sa le s 210,000
Total cash re ce ipts $ 170,000 $ 400,000 $ 335,000

April: .70 × $200,000 = $140,000 a nd .25 × $200,000 = $50,000


May: .70 × $500,000 = $350,000 a nd .25 × $500,000 = $125,000
June: .70 × $300,000 = $210,000
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Comprehensive
Comprehensive Cash
Cash Budget
Budget

With just a little


more information
we will be able to
prepare a
comprehensive
cash budget.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Comprehensive
Comprehensive Cash
Cash Budget
Budget
Additional
Additional Information
Information
Ellis Magnet Company:
 Has a $100,000 line of credit at its bank, with a zero
balance on April 1.
 Maintains a $30,000 minimum cash balance.
 Borrows at the beginning of a month and repays at the
end of a month.
 Pays interest at 16 percent when a principal payment is
made.
 Pays a $51,000 cash dividend in April.
 Purchases equipment costing $143,700 in May and
$48,800 in June.
 Has a $40,000 cash balance on April 1.
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000
Ca sh re ce ipts
Ca sh a va ila ble
Ca sh pa ym e nts:
M a te ria ls budge t
La bor budge t
M a nufa cturing OH budge t
S &A e x pe nse budge t
Equipm e nt purcha se s
Divide nds
Tota l ca sh pa ym e nts
Ba la nce be fore fina ncing
Borrow ing
P rincipa l re pa ym e nt
Inte re st
Ending ca sh ba la nce
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000
Ca sh re ce ipts 170,000 400,000 335,000
Ca sh a va ila ble $ 210,000
Ca sh pa ym e nts:
M a te ria ls budge t
La bor budge t
M a nufa cturing OH budge t
S &A e x pe nse budge t
Equipm e nt purcha se s
Divide nds
Tota l ca sh pa ym e nts
Ba la nce be fore fina ncing
Borrow ing
P rincipa l re pa ym e nt
Inte re st
Ending ca sh ba la nce
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000
Ca sh re ce ipts 170,000 400,000 335,000
Ca sh a va ila ble $ 210,000
Ca sh pa ym e nts:
M a te ria ls budge t $ 40,000 $ 72,300 $ 72,700
La bor budge t 13,000 23,000 14,500
M a nufa cturing OH budge t 56,000 76,000 59,000
S &A e x pe nse budge t 70,000 85,000 75,000
Equipm e nt purcha se s 0 143,700 48,800
Divide nds 51,000 0 0
Tota l ca sh pa ym e nts $ 230,000 $ 400,000 $ 270,000
Ba la nce be fore fina ncing $ (20,000)
Borrow ing
P rincipa l re pa ym e nt
Inte re st
Ending ca sh ba la nce
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000 $ 30,000
Ca sh re ce ipts 170,000 400,000 335,000
Ca sh a va ila ble $ 210,000 $ 430,000
Ca sh pa ym e nts:
M a te ria ls budge t $ 40,000 $ 72,300 $ 72,700
La bor budge t 13,000 23,000 14,500
M a nufa cturing OH budge t 56,000 76,000 59,000
S &A e x pe nse budge t 70,000 85,000 75,000
Equipm e nt purcha se s 0 143,700 48,800
Divide nds 51,000 0 0
Tota l ca sh pa ym e nts $ 230,000 $ 400,000 $ 270,000
Ba la nce be fore fina ncing $ (20,000) $ 30,000
Borrow ing 50,000
P rincipa l re pa ym e nt 0
Inte re st 0
Ending ca sh ba la nce $ 30,000
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000 $ 30,000 $ 30,000
Ca sh re ce ipts 170,000 400,000 335,000
Ca sh a va ila ble $ 210,000 $ 430,000 $ 365,000
Ca sh pa ym e nts:
M a te ria ls budge t $ 40,000 $ 72,300 $ 72,700
La bor budge t 13,000 23,000 14,500
M a nufa cturing OH budge t 56,000 76,000 59,000
S &A e x pe nse budge t 70,000 85,000 75,000
Equipm e nt purcha se s 0 143,700 48,800
Divide nds 51,000 0 0
Tota l ca sh pa ym e nts $ 230,000 $ 400,000 $ 270,000
Ba la nce be fore fina ncing $ (20,000) $ 30,000 $ 95,000
Borrow ing 50,000 0
P rincipa l re pa ym e nt 0 0
Inte re st 0 0
Ending ca sh ba la nce $ 30,000 $ 30,000
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
C omprehensive C ash B udget
April May June
Be ginning ca sh ba la nce $ 40,000 $ 30,000 $ 30,000
Ca sh re ce ipts 170,000 400,000 335,000
Ca sh a va ila ble $ 210,000 $ 430,000 $ 365,000
Ca sh pa ym e nts:
M a te ria ls budge t $ 40,000 $ 72,300 $ 72,700
La bor budge t 13,000 23,000 14,500
M a nufa cturing OH budge t 56,000 76,000 59,000
S &A e x pe nse budge t 70,000 85,000 75,000
Equipm e nt purcha se s 0 143,700 48,800
Divide nds 51,000 0 0
Tota l ca sh pa ym e nts $ 230,000 $ 400,000 $ 270,000
Ba la nce be fore fina ncing $ (20,000) $ 30,000 $ 95,000
Borrow ing 50,000 0 0
P rincipa l re pa ym e nt 0 0 (50,000)
Inte re st $50,000 × .16 × 3/12
0 = $2,000
0 (2,000)
Ending ca sh ba la nce $ 30,000 $ 30,000 $ 43,000
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement

Cash Budgeted
Budget Income
Statement
t ed
e
pl
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement
Ellis Ma gne t Com pa ny
Budge te d Incom e Sta te m e nt
For the Thre e Months Ende d June 30

Sa le s (100,000 units @ $10) $ 1,000,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement
Ellis Ma gne t Com pa ny
Budge te d Incom e Sta te m e nt
For the Thre e Months Ende d June 30

Sa le s (100,000 units @ $10) $ 1,000,000


Cost of goods sold (100,000 @ $4.99) 499,000
Gross m a rgin $ 501,000

Computation of unit cost follows

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement
Production costs per unit Qua ntity Cost Tota l
Dire ct mate ria ls 5.00 lbs. $ 0.40 $ 2.00
Dire ct la bor 0.05 hrs. $ 10.00 0.50
Manufa cturing overhea d 0.05 hrs. $ 49.70 2.49
Total unit cost $ 4.99

Total mfg. OH for quarter $251,000 = $49.70 per hr.


Total labor hours required 5,050 hrs.
From labor and Mfg. OH budgets
Labor Hours Mfg. OH
Manufacturing
April 1,300 $ 76,000
May 2,300 96,000 overhead is applied
June 1,450 79,000 based on
Total 5,050 $ 251,000 direct labor hours.

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement
Ellis Ma gne t Com pa ny
Budge te d Incom e Sta te m e nt
For the Thre e Months Ende d June 30

Sa le s (100,000 units @ $10) $ 1,000,000


Cost of goods sold (100,000 @ $4.99) 499,000
Gross m a rgin $ 501,000
Se lling a nd a dm inistra tive e x pe nse s 260,000
Ope ra ting incom e $ 241,000
From S&A Expense Budget
April $ 80,000
May 95,000
June 85,000
Total $ 260,000
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Income
Income Statement
Statement
Ellis Ma gne t Com pa ny
Budge te d Incom e Sta te m e nt
For the Thre e Months Ende d June 30

Sa le s (100,000 units @ $10) $ 1,000,000


Cost of goods sold (100,000 @ $4.99) 499,000
Gross m a rgin $ 501,000
Se lling a nd a dm inistra tive e x pe nse s 260,000
Ope ra ting incom e $ 241,000
Inte re st e x pe nse 2,000
Ne t incom e $ 239,000

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Balance
Balance Sheet
Sheet

Budgeted Budgeted
Income Balance
Statement Sheet
t ed
e
pl
om
C

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
The
The Budgeted
Budgeted
Balance
Balance Sheet
Sheet

Ellis
Ellis reports
reports the
the following
following account
account balances
balances
on
on June
June 30,
30, prior
prior to
to preparing
preparing its
its budgeted
budgeted
financial
financial statements:
statements:
 Land - $50,000
Land - $50,000
 Building (net) - $174,500
Building (net) - $174,500
 Common stock - $200,000
Common stock - $200,000
 Equipment (net) - $192,500
Equipment (net) - $192,500
 Retained earnings - $148,150
Retained earnings - $148,150

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Ellis Magnet Company
Budgeted Balance Sheet 25% of June
June 30, 2002 sales of
Current assets $300,000
Cash $ 43,000
Accounts receivable 75,000 11,500 lbs.
Raw materials inventory 4,600
@ $.40 per lb.
Finished goods inventory 24,950
Total current assets $ 147,550
Property and equipment
Land $ 50,000
5,000 units
Building 174,500 @ $4.99 each
Equipment 192,500
Total property and equipment $ 417,000
Total assets $ 564,550 50% of June
Liabilities and Equities
purchases
Accounts payable $ 28,400 of $56,800
Common stock 200,000
Retained earnings 336,150
Total liabilities and equities $ 564,550
Computer Infinity (Pvt.) Ltd
McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
Ellis Magnet Company
Budgeted Balance Sheet
June 30, 2002
Current assets
Cash $ 43,000
Accounts receivable 75,000
Raw materials inventory 4,600
Finished goods inventory 24,950
Total current assets $ 147,550
Property and equipment
Land $ 50,000
Beginning
Buildingbalance $ 148,150 174,500
Add: net income
Equipment 239,000 192,500
Deduct: dividends
Total property and (51,000)
equipment $ 417,000
Ending balance
Total assets $ 336,150 $ 564,550

Liabilities and Equities


Accounts payable $ 28,400
Common stock 200,000
Retained earnings 336,150
Total liabilities and equities $ 564,550

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP
End
End &
& Thank
Thank you
you
I would be happy to assist
you with your cash budget!

Computer Infinity (Pvt.) Ltd


McGraw-Hill/Irwin Karachi©Branch
The McGraw-Hill
CouncilCompanies, Inc., 2002
2009 - ICMAP

You might also like