POA学习整理-19：Budgetary Planning
Section 1 Budgeting Basics
A budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms.
The Benefits of Budgeting
1. Requires management to plan ahead
2. Provides definite objectives for evaluating performance
3. Creates an early warning system for potential problems
4. Facilitates coordination of activities
5. Results in greater management awareness
6. Motivates personnel to meet planned objectives
Essentials of Effective Budgeting
1. Sound organizational structure
2. Research and analysis
3. Acceptance by all levels of management
Length of the Budget Period
A budget may be prepared for any period of time. The most common budget period is one year.
The Budgeting Process
Budgeting starts several months before the end of the current year. It begins with the collection of data from each organizational unit. The budget is developed within the framework of a sales forecast. Sales forecasting involves: (1) general economic conditions, (2) industry trends, (3) market research studies, (4) anticipated advertising and promotion, (5) previous market share, (6) changes in prices, and (7) technological developments. The budget is then put in its final form by the budget committee, approved, and distributed.
Budgeting and Long-Range Planning
Budgeting Long-range Planning
Time period involved One year or shorter At least 5 years
Emphasis Achieving specific short-term goals Long-term goals
Amount of detail presented Very detailed Less detailed
The Master Budget
The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period. It consists of two classes of budgets. Operating budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, selling and administrative budget, and budgeted income statement. Financial budgets include: capital expenditure budget, cash budget, and budgeted balance sheet.
Section 2 Preparing the Operating Budgets
Sales Budget
Sales budget is the first budget prepared; it derived from the sales forecast. Each of the other budgets depends on the sales budget. It is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.
Production Budget
The production budget shows the units that must be produced to meet anticipated sales.
Budgeted Sales Units + Desired Ending Finished Goods Units – Beginning Finished Goods Units = Required Production Units
A realistic estimate of ending inventory is essential in scheduling production requirements.
Direct Materials Budget
The direct materials budget shows both the quantity and cost of direct materials to be purchased.
Direct Materials Units Required for Production + Desired Ending Direct Materials Units – Beginning Direct Materials Unit = Required Direct Materials Purchases Units
The budged cost of direct materials is to be purchased is then computed by multiplying the required units by the anticipated cost per unit. The desired ending inventory is again a key component in the budgeting process.
Direct Labor Budget
The direct labor budget contains the quantity (hours) and cost of direct labor necessary to meet production requirements. Direct labor hours are determined from the production budget. Direct labor costs are then determined by multiplying direct labor hours by anticipated hourly wage.
Manufacturing Overhead Budget
The manufacturing overhead budget show the expected manufacturing overhead costs for the budget period. It distinguishes between variable and fixed overhead costs.
Selling and Administrative Expense Budget
These operating expenses are also classified as either variable or fixed costs.
Budgeted Income Statement
The budgeted income statement is the important end-product of the operating budgets. It indicates the expected profitability of operations for the budget period.
Section 3 Preparing the Financial Budgets
Cash Budget
The cash budget shows anticipated cash flows. It is considered to be the most important output in preparing financial budgets. It contains three sections: cash receipts, cash disbursements, and financing. A cash budget contributes to more effective cash management.
Budgeted Balance Sheet
The budgeted balance sheet is a projection of financial position at the end of the budget period.
Section 4 Budgeting in Nonmanufacturing Companies
Merchandisers
The major differences between the master budgets of a merchandiser and a manufacturer are these: (1) A merchandiser uses a merchandise purchases budget instead of a production budget. (2) A merchandiser does not use the manufacturing budgets (direct materials, direct labor, and manufacturing overhead). The merchandiser purchases budget shows the estimated cost of goods to be purchased to meet expected sales.
Budgeted Cost of Goods Sold + Desired Ending Merchandise Inventory – Beginning Merchandise Inventory = Required Merchandise Purchases
Service Enterprises
The critical factor in budgeting is coordinating professional staff needs with anticipated services. Budget data for service revenue may be obtained from expected output or expected input.
Non-For-Profit Organizations
In most cases not-for-profit entities budget on the basis of cash flows (expenditures and receipts), rather than on a revenue and expense basis. The starting point in the process is usually expenditures, not receipts.
A budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms.
The Benefits of Budgeting
1. Requires management to plan ahead
2. Provides definite objectives for evaluating performance
3. Creates an early warning system for potential problems
4. Facilitates coordination of activities
5. Results in greater management awareness
6. Motivates personnel to meet planned objectives
Essentials of Effective Budgeting
1. Sound organizational structure
2. Research and analysis
3. Acceptance by all levels of management
Length of the Budget Period
A budget may be prepared for any period of time. The most common budget period is one year.
The Budgeting Process
Budgeting starts several months before the end of the current year. It begins with the collection of data from each organizational unit. The budget is developed within the framework of a sales forecast. Sales forecasting involves: (1) general economic conditions, (2) industry trends, (3) market research studies, (4) anticipated advertising and promotion, (5) previous market share, (6) changes in prices, and (7) technological developments. The budget is then put in its final form by the budget committee, approved, and distributed.
Budgeting and Long-Range Planning
Budgeting Long-range Planning
Time period involved One year or shorter At least 5 years
Emphasis Achieving specific short-term goals Long-term goals
Amount of detail presented Very detailed Less detailed
The Master Budget
The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period. It consists of two classes of budgets. Operating budgets include: sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, selling and administrative budget, and budgeted income statement. Financial budgets include: capital expenditure budget, cash budget, and budgeted balance sheet.
Section 2 Preparing the Operating Budgets
Sales Budget
Sales budget is the first budget prepared; it derived from the sales forecast. Each of the other budgets depends on the sales budget. It is prepared by multiplying the expected unit sales volume for each product by its anticipated unit selling price.
Production Budget
The production budget shows the units that must be produced to meet anticipated sales.
Budgeted Sales Units + Desired Ending Finished Goods Units – Beginning Finished Goods Units = Required Production Units
A realistic estimate of ending inventory is essential in scheduling production requirements.
Direct Materials Budget
The direct materials budget shows both the quantity and cost of direct materials to be purchased.
Direct Materials Units Required for Production + Desired Ending Direct Materials Units – Beginning Direct Materials Unit = Required Direct Materials Purchases Units
The budged cost of direct materials is to be purchased is then computed by multiplying the required units by the anticipated cost per unit. The desired ending inventory is again a key component in the budgeting process.
Direct Labor Budget
The direct labor budget contains the quantity (hours) and cost of direct labor necessary to meet production requirements. Direct labor hours are determined from the production budget. Direct labor costs are then determined by multiplying direct labor hours by anticipated hourly wage.
Manufacturing Overhead Budget
The manufacturing overhead budget show the expected manufacturing overhead costs for the budget period. It distinguishes between variable and fixed overhead costs.
Selling and Administrative Expense Budget
These operating expenses are also classified as either variable or fixed costs.
Budgeted Income Statement
The budgeted income statement is the important end-product of the operating budgets. It indicates the expected profitability of operations for the budget period.
Section 3 Preparing the Financial Budgets
Cash Budget
The cash budget shows anticipated cash flows. It is considered to be the most important output in preparing financial budgets. It contains three sections: cash receipts, cash disbursements, and financing. A cash budget contributes to more effective cash management.
Budgeted Balance Sheet
The budgeted balance sheet is a projection of financial position at the end of the budget period.
Section 4 Budgeting in Nonmanufacturing Companies
Merchandisers
The major differences between the master budgets of a merchandiser and a manufacturer are these: (1) A merchandiser uses a merchandise purchases budget instead of a production budget. (2) A merchandiser does not use the manufacturing budgets (direct materials, direct labor, and manufacturing overhead). The merchandiser purchases budget shows the estimated cost of goods to be purchased to meet expected sales.
Budgeted Cost of Goods Sold + Desired Ending Merchandise Inventory – Beginning Merchandise Inventory = Required Merchandise Purchases
Service Enterprises
The critical factor in budgeting is coordinating professional staff needs with anticipated services. Budget data for service revenue may be obtained from expected output or expected input.
Non-For-Profit Organizations
In most cases not-for-profit entities budget on the basis of cash flows (expenditures and receipts), rather than on a revenue and expense basis. The starting point in the process is usually expenditures, not receipts.
