managerial 19

Expected Unit Sales + Units in Desired Ending Inventory- Units in Beginning Inventory

DM Needed for Production + DM in Desired Ending Inventory - DM in Beginning Iventory

A plan of action expressed in financial terms.

Budgeting is a planning and control tool used by managers.

Identifies strategies for future activities and operations, generally covering at least five years.

• Develop a strategic plan
• Develop long-term and short-term objectives.
• Develop short-term plans.
• Create budgets based on short-term plans.
• Compare actual results with planned (budgeted) amounts.
• Take corrective action

• Force managers to plan.
• Provide info that can aid decision making.
• Provide standards used for performance evaluation and control
• Improve communication and coordination.

Involves comparing actual results with budgeted amoutn and take correctiv action whenever actual performance deviates significantly from planned performance.

A moving twelve month budget. As a month expires in the budget, an additional month is added so that the company always has a twelve- month plan on hand.

A comprehensive financial plan consisting of various individual budgets.

The basis for the sales budget and usually the responsibility of the marketing department.

The expected sales in units and dollars

Indicates the number of units of finished product to be produced in order to meet sales needs and inventory requirements

Quantity of DM to be purchased x the Expected Cost per Unit of DM

A budget of planned expenditures for DL. It indicates the rate per hour and the number of hours necessary to meet production requirements.

It shows the expected cost of all production costs other than DM and DL.

DM used + DL used + OH + Beg finished goods- Ending Finished Goods

Sales - Cost of Goods Sold - Selling and admin- Interest Expense - Income taxes

• Cash budget
• Budgeted balance sheet
• Budget for capital expenditures.

A summary of planned cash receipts and cash payments