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OperBudgt

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OperBudgt

Uploaded by

Dano
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PROJECT ONE

OPERATIONAL
BUDGET
Soriano Company is preparing its
Operating Budget for 2014.

Relevant data pertaining to its sales,


production, and direct materials budgets
are as follows.
Sales for the year are expected to total 1,200,000
units.
Quarterly sales, as a percentage of total sales, are
20%, 25%, 30%, and 25%, respectively.
 The selling price is expected to sell Birr. 50 per unit
for the first three quarters and Birr. 55 per unit
beginning in the fourth quarter.
Sales in the first quarter of 2015 are expected to be
10% higher than the budgeted sales for the first
quarter of 2014.

Sales Budget.
Management desires to
maintain the ending finished
goods inventories at 25% of
the next quarter’s budgeted
sales volume.

Production Budget.
Each unit requires 3 pounds of raw
materials at a cost of Birr 5 per
pound.
Management desires to maintain raw
materials inventories at 5% of the
next quarter’s production
requirements.
Assume the production requirements
for the first quarter of 2015 are
810,000 pounds.
Direct materials Budget.
Direct labor hours are
determined from the production
budget.
At Soriano Company, 1.5 hours of
direct labor are required to
produce each unit of finished
goods.
The anticipated hourly wage rate
is Birr. 10.
Direct Labor cost Budget
Soriano Company is preparing its
manufacturing overhead budget for 2014.
Relevant data consist of the following.
Variable overhead costs per direct labor
hour: indirect materials Birr 0.80; indirect
labor Birr 1.20; and maintenance Birr 0.50.
Fixed overhead costs per quarter:
supervisory salaries Birr 35,000;
depreciation Birr 15,000; and maintenance
Birr 12,000
Manufacturing overhead
budget
Its budgeted selling and
administrative expenses for 2014 are
Birr. 12,000,000.
a. Calculate the budgeted total unit
cost
b. Prepare the budgeted income
statement for 2014.
 Which of the following are correct statements about a budget?
A. It is a formal written statement of management's plans for a
specified future time period.
B. It becomes an important basis for evaluating performance
C. It promotes efficiency and serves as a deterrent to waste and
inefficiency
D. All of these options are correct statements.
 Which of the operating budgets is prepared first?
A. Production budget C. Sales budget
B. Cash received budget D. Cash payments budget
 A company has sales of 2,600 units. There are 1,400 units of opening
stock while the closing stock is planned to be 1,800 units. What
production is needed to satisfy sales?
A. 2,437 B. 2,200 C. 3,000 D. 4,000
 The formula for the production budget is budgeted sales in units plus:
A. Desired ending merchandise inventory less beginning merchandise
inventory.
B. Beginning finished goods units less desired ending finished goods units.
C. Desired ending direct materials units less beginning direct materials units.
D. Desired ending finished goods units less beginning finished goods units.
 Direct materials inventories are kept in pounds in Bright
Company, and the total pounds of direct materials needed
for production is 9,500. If the beginning inventory is 1,000
pounds and the desired ending inventory is 2,200 pounds,
the total pound to be purchased is:
A. 9,400 B. 9,700 C. 9,500 D. 10,700
 Each of the following budgets is used in preparing the
budgeted income statement except the:
A. Sales budget C. Selling and administrative budget
B. Capital expenditure budget D. Direct labor budget
 The budgeted income statement is:
◦ The end-product of the operating budgets.
◦ The end-product of the financial budgets.
◦ The starting point of the master budget.
◦ Dependent on cash receipts and cash disbursements
 Expected direct materials purchases in Read Company are
70,000 in the first quarter and 90,000 in the second quarter.
Forty percent of the purchases are paid in cash as incurred, and
the balance is paid in the following quarter. The budgeted cash
payments for purchases in the second quarter are:
A. 96,000 B. 78,000 C. 90,000 D. 72,000
 Budgets are used by:
A. Merchandisers C. Service enterprises.
B. Not-for-profit organizations D. Manufacturer
E. All of these organizations use budgets
 The budget for a merchandiser differs from a budget for a
manufacturer because:
A. A merchandise purchases budget replaces the production budget
B. The manufacturing budgets are not applicable (direct materials,
direct labor, and factory overhead)
C. None of the above
D. All of the above
WOLFORD Company has budgeted
sales for next four quarter as follows:
2014 2015
First Second Third Fourth First
Sales, in unit 60,000 80,000 90,000 70,000 80,000
 The sales budget for the year 2014, by quarter, based on a
sales price of Br. 60 per unit.
 The company process preparing a production budget for the
year 2014. Company desired ending finished goods
inventory 20,000 units at the end of the fourth Quarter in
2013. The 2014 year budgeted ending finished goods
inventory level must equal 30 percent of the next quarter
sales.
A total of 30,000 pounds of material are on hand
at the end of the fourth Quarter in 2013. 2
pounds of material are required for each unit
produced. The Material cost is Br. 5 per pound.
Each unit of output requires 0.84 direct labor-
hours. The direct labor rate is Br. 9.40 per direct
labor-hour.
The company has a policy of maintaining a stock
of material on hand at the end of each quarter:
Quarter Ending Material inventory
First Quarter 30,000
Second Quarter 35,000
Third Quarter 25,000
Fourth Quarter 30,000
PROJECT # 2: PRODUCTIONBUDGET

NIGHT-LIGHT COMPANY produces floor mats used in


gyms and dojos. The sales budget for four months of the
year is as follows:
Unit Sales Dollar Sales
July 12,000 $240, 000
August 50,000 1,000,000
September 30,000 600,000
October 28,000 560,000
Company policy requires that ending inventories for each
month be 15 percent of next month’s sales. At the
beginning of July, the beginning inventory of mats met that
policy.
Required:
Prepare a production budget for the third quarter of the
year. Show the number of units that should be produced
each month as well as for the quarter in total.

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