Bài giảng môn Kế toán, kiểm toán - Chapter 9: Financial planning and analysis: the master budget

Financial Planning and
Analysis (FP&A) Systems

financial planning and analysis (FP&A) system helps managers assess the company’s future and know if they are reaching their performance goals. A complete FP&A system includes subsystems for (1) planning, (2) measuring and recording results, and (3) evaluating performance.

The planning component of the FP&A system is called the master budget. It is intended to help ensure that plans are consistent and yield a result that makes sense for the organization.

 

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Financial Planning and Analysis: The Master Budget Chapter 9Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.Financial Planning and Analysis (FP&A) SystemsA financial planning and analysis (FP&A) system helps managers assess the company’s future and know if they are reaching their performance goals. A complete FP&A system includes subsystems for (1) planning, (2) measuring and recording results, and (3) evaluating performance.The planning component of the FP&A system is called the master budget. It is intended to help ensure that plans are consistent and yield a result that makes sense for the organization.9-2Purposes of Budgeting SystemsBudgeta detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time.PlanningFacilitating Communication and CoordinationAllocating ResourcesControlling Profit and OperationsEvaluating Performance and Providing Incentives9-3Budgeted Income StatementCash BudgetSales of Services or GoodsEndingInventoryBudget Work in Processand FinishedGoodsProductionBudgetDirectMaterialsBudgetSelling andAdministrativeBudgetDirectLabor BudgetOverheadBudgetEndingInventoryBudget Direct MaterialsBudgeted Balance SheetBudgeted Statement of Cash Flows9-4Activity-Based Costing versus Activity-Based BudgetingResourcesCost objects: products and services produced, and customers served.ActivitiesResourcesForecast of products and services to be produced and customers served.ActivitiesActivity-Based Costing (ABC)Activity-Based Budgeting (ABB)9-5Sales BudgetBreakers, Inc. is preparing budgets for the quarter ending June 30.Budgeted sales for the next five months are:April 20,000 unitsMay 50,000 unitsJune 30,000 unitsJuly 25,000 unitsAugust 15,000 units.The selling price is $10 per unit.9-6Sales Budget9-7Production BudgetThe management of Breakers, Inc. wants ending inventory to be equal to 20% of the following month’s budgeted sales in units. On March 31, 4,000 units were on hand. Let’s prepare the production budget.9-8Production BudgetFrom salesbudgetMarch 31ending inventoryEnding inventory becomes beginning inventory the next month9-9Direct-Material BudgetAt Breakers, five pounds of material are required per unit of product.Management wants materials on hand at the end of each month equal to 10% of the following month’s production.On March 31, 13,000 pounds of material are on hand. Material cost $.40 per pound. Let’s prepare the direct materials budget.9-10Direct-Material BudgetFrom our productionbudget 10% of the following month’s production March 31 inventory9-11Direct-Material Budget9-12Direct-Labor BudgetAt Breakers, each unit of product requires 0.1 hours of direct labor.The Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week.In exchange for the “no layoff” policy, workers agreed to a wage rate of $8 per hour regardless of the hours worked (No overtime pay).For the next three months, the direct labor workforce will be paid for a minimum of 3,000 hours per month.Let’s prepare the direct labor budget.9-13Direct-Labor BudgetFrom ourproductionbudgetThis is the greater oflabor hours required orlabor hours guaranteed.9-14Overhead BudgetHere is Breakers’ Overhead Budget for the quarter.9-15Selling and Administrative Expense BudgetAt Breakers, variable selling and administrative expenses are $0.50 per unit sold.Fixed selling and administrative expenses are $70,000 per month.The $70,000 fixed expenses include $10,000 in depreciation expense that does not require a cash outflow for the month.9-16Selling and Administrative Expense BudgetFrom ourSales budget9-17Cash Receipts BudgetAt Breakers, all sales are on account.The company’s collection pattern is:70% collected in the month of sale,25% collected in the month following the sale,5% is uncollected.The March 31 accounts receivable balance of $30,000 will be collected in full.9-18Cash Receipts Budget9-19Cash Disbursement BudgetBreakers pays $0.40 per pound for its materials.One-half of a month’s purchases are paid for in the month of purchase; the other half is paid in the following month.No discounts are available.The March 31 accounts payable balance is $12,000.9-20Cash Disbursement Budget140,000 lbs. × $.40/lb. = $56,0009-21Cash Disbursement BudgetBreakers:Maintains a 12% open line of credit for $75,000.Maintains a minimum cash balance of $30,000.Borrows and repays loans on the last day of the month.Pays a cash dividend of $25,000 in April.Purchases $143,700 of equipment in May and $48,300 in June paid in cash.Has an April 1 cash balance of $40,000.9-22To maintain a cashbalance of $30,000,Breakers must borrow$35,000 on its line of credit.Cash Budget (Collections and Disbursements)From our CashReceipts BudgetFrom our Cash DisbursementsBudgetFrom our Direct Labor BudgetFrom our Overhead BudgetFrom our Selling and Administrative Expense Budget9-23Cash Budget (Collections and Disbursements)Breakers mustborrow anaddition $13,800to maintain acash balanceof $30,000.9-24At the end of June, Breakers has enough cash to repaythe $48,800 loan plus interest at 12%.Cash Budget (Collections and Disbursements)9-25Cash Budget (Collections and Disbursements)9-26Cash Budget (Financing and Repayment)Ending cash balance for Aprilis the beginning May balance.9-27Cost of Goods Manufactured9-28Cost of Goods Sold9-29Budgeted Income Statement9-30Budgeted Statement of Cash Flows9-31Budgeted Balance SheetBreakers reports the following account balances on March 31 prior to preparing its budgeted financial statements for June 30:Land - $50,000Building (net) - $148,000Common stock - $217,000Retained earnings - $46,4009-3225%of Junesales of $300,00011,500 lbs. at$.40 per lb.5,000 units at$4.60 per unit.50% of Junepurchases of $56,8009-33Budgeted Income StatementCash BudgetSales of Services or GoodsEndingInventoryBudget Work in Processand FinishedGoodsProductionBudgetDirectMaterialsBudgetSelling andAdministrativeBudgetDirectLabor BudgetOverheadBudgetEndingInventoryBudget Direct MaterialsBudgeted Balance SheetBudgeted Statement of Cash FlowsWhen the interactions of the elements of the master budget are expressed as a set of mathematical relations, it becomes a financial planning model that can be used to answer “what if” questions about unknown variables. 9-34Budget AdministrationThe Budget Committee is a standing committee responsible for . . .overall policy matters relating to the budget.coordinating the preparation of the budget.9-35Behavioral Impact of BudgetsBudgetary Slack: Padding the BudgetPeople often perceive that their performance will look better in their superiors’ eyes if they can “beat the budget.”9-36Participative BudgetingFlow of Budget Data9-37

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