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    CH9

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    Younanymous Decision
    The document discusses components of a master budget for a manufacturing organization. It explains that a master budget includes sales, production, operating expenses and capital expenditures budgets. The sales budget is the most important component as it drives all other budgets. The production budget is calculated based on expected sales, desired ending inventory and beginning inventory. Depreciation is deducted at the bottom of the manufacturing overhead budget as it is a non-cash expense.

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    CH9

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    Younanymous Decision
    14 views5 pages
    The document discusses components of a master budget for a manufacturing organization. It explains that a master budget includes sales, production, operating expenses and capital expenditures budgets. The sales budget is the most important component as it drives all other budgets. The production budget is calculated based on expected sales, desired ending inventory and beginning inventory. Depreciation is deducted at the bottom of the manufacturing overhead budget as it is a non-cash expense.

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    The document discusses components of a master budget for a manufacturing organization. It explains that a master budget includes sales, production, operating expenses and capital expenditures budgets. The sales budget is the most important component as it drives all other budgets. The production budget is calculated based on expected sales, desired ending inventory and beginning inventory. Depreciation is deducted at the bottom of the manufacturing overhead budget as it is a non-cash expense.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    14 views5 pages

    CH9

    Uploaded by

    Younanymous Decision
    The document discusses components of a master budget for a manufacturing organization. It explains that a master budget includes sales, production, operating expenses and capital expenditures budgets. The sales budget is the most important component as it drives all other budgets. The production budget is calculated based on expected sales, desired ending inventory and beginning inventory. Depreciation is deducted at the bottom of the manufacturing overhead budget as it is a non-cash expense.

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    of 5

    CHAPTER 9

    #4 Why do successful companies tend to use the bottom-up approach to


    budgeting?
    As we all know that budgeting is one of the most important aspects to be
    prioritized in every business. A successful company always starts with the scratch
    where involvement of the employees in the organization should be considered. In this
    bottom-up approach, the involvement of the employees has a huge impact on
    establishing the operational budget. The lower employees are more knowledgeable
    when it comes to the accuracy of budget information. Therefore, an employee's
    involvement in the budgeting process increases the likelihood employees will accept the
    budget.

    #5 Briefly describe the components of a master budget for a manufacturing


    organization
    In a budgeting process, master budget comprises the budget schedules which
    concerns the agenda of organization for the succeeding periods. These periods can be
    prepared monthly, quarterly or annually depending on the internal control of the
    organization. This master budget consists of necessary information such as sales,
    production, operating expenses and capital expenditures. This master budget serves as
    the basis for the financial performance of the company. Managers use this information
    for the creation of financial statements.

    #6 Why is the sales budget the most important component of the master
    budget?
    In a master budget, the Sales budget is the initial phase or starting point. During
    business operations, the management always estimates the units of products the
    organization expects to sell, considering also the expected sales per unit. The sales
    budget is an important component of the master budget since it is the important driver
    among all the budgets concerned.
    #8 Describe how units to be produced are calculated in the production budget.
    The production budget is an estimate of units to be produced and is based on
    sales projections plus an estimate of desired ending finished goods inventory less
    beginning finished goods inventory. In simplified terms, Sum of expected sales in
    units and desired units of ending inventory less the units in beginning inventory is equal
    to the units to be produced.

    #10 Why is depreciation deducted at the bottom of the manufacturing overhead


    budget?
    It is simply that depreciation is not a cash transaction therefore it is deducted from
    the bottom of manufacturing overhead budget. Aside from that, it aims to determine the
    cash payments for overhead.

    EXERCISE A

    #28 “Sales and Production Budgets. Templeton Corporation

    A. Prepare a sales budget for Templeton Corporation using a format similar to


    . (Hint: be sure to increase last year’s unit sales by 10 percent.)
    B. Prepare a production budget for Templeton Corporation using a format
    similar to.

    29 to 31. Templeton Corporation

    A. Prepare a direct materials purchases budget for Templeton Corporation


    using a format similar to .
    B. Prepare a direct labor budget for Templeton Corporation using a format
    similar to .

    Manufacturing Overhead Budget. Templeton Corporation


    Budgets for Cash Collections from Sales and Cash Payments for Purchases.
    Templeton Corporation

    A. Prepare a budget for cash collections from sales. Use a format similar to
    the top section of

    B. Prepare a budget for cash payments for purchases of materials. Use a


    format similar to the middle section of. Round to the nearest dollar

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