Budgeting in Planning and Decision Making: Production, Sales, and Purchases - Prof. James , Study notes of Financial Accounting

Download Budgeting in Planning and Decision Making: Production, Sales, and Purchases - Prof. James and more Study notes Financial Accounting in PDF only on Docsity! Chapter 9 Notes—Budgeting in Planning/Decision Making 3/28/11  Production=Sales+ Desired Ending Inventory-Beginning Inventory o This equation is talking about finished goods, rather than raw materials o To determine DEI you are always looking at next month’s sales o To determine Ending Inv. You look at the past months DEI  Purchases=Production+ Desired Ending inventory {in materials needed for production}- Beginning inventory (materials) o This equation deals with raw materials NOT finished goods  SalesProductionPurchases, DL, MOH  Review Questions o Three types of activities assisted by budgeting  Planning, Operating, Controlling o Participatory Budgeting  Budget created by lower level managers create budget that flows up, bottom up approach. o Budget prepared first  Sales  Then, production  9.01 o Expected Sales Rev. for coming year=? o 100,000/1.25=125,000units sold o 125,000*($10*1.2)=1,500,000Sales Rev.  9.06** o Production=500,000*2=1,000,000 o Desired Ending Inv.=50,000 o It would need to purchases enough raw materials to manufacturing 470,000 finished goods (500,000+50,000-80,000)??  9.15 o Sales Budget: o Mult. By price * units in first step* o October  6500+(7200*.10)-0=7220 for o Nov: last month’s EI=720  7200+ (9600*.10)-720=7440 for Nov. o Dec.