PROFIT PLANNINGBUDGETING
 Read
pg 376
 Organize your business
 Determine when you need cash
 Baseline to judge how you are doing
 RoseBowl article
 Everyone
needs to be involved.
 Should be created from the bottom up not
from the top down
 Handout about fraud
 10
Budgets – page 375 Exhibit 9-2
 First – Sales – everything based on these #
 Last – Balance Sheet
 1)Sales
and 2)Cash Receipts
 3)Production
 Cost of a product: 4)DM ,5)Cash Disb, 6)DL,
7)OH
 8)Cost
of Goods Manufactured: Unit Product
Cost -Book has Ending Finishing Goods Inventory –
 9)Selling
and Administrative
 10)Cash
 11)Income
Statement
 12)Balance Sheet
*Sales in Units – determine by quarter
*x Sales Price
=
Total Sales
 Information
that will cause the change in the
entire budget
* information you must enter
 Other
numbers are calculated

1st qtr 2nd qtr 3rd qtr 4th qtr TOTAL Sales

1st qtr Sales
70%

2nd qtr Sales

3rd qtr Sales

4th qtr Sales

TOTAl CASH Rec
30%
70%
30%
70%
30%
70%
 Sales
in Units
+*Ending Inventory-FG (% of next quarter)
 Total
Needs
 - Less Beginning FG – last months ending
 Required production
 Production
in Units
*x Raw materials per unit
=
Production Needs

* +Production for E.I. --% of next quarter
 Total
Needs
 -Less Beginning Raw Materials – from last
quarter
* X cost per pound
 Cost
of Raw Materials to be purchased

1st qtr 2nd qtr 3rd qtr 4th qtr TOTAL purch

1st qtr Pur

2nd qtr Pur

3rd qtr Pur

4th qtr Pur

TOTAl CASH Dis
50%
50%
50%
50%
50%
50%
50%
 Production
in Units
 X hours per unit
 = DL Hours required
 X average rate
 =DL $
 Use
these numbers for overhead driver
 Variable
 Fixed
Costs (per unit)
Costs ( same amount each month)
 Estimated
OH cost/estimated driver
=Predetermined overhead rate
 Selling
and G&A same structure
 Combines
all three product costs
 Direct Materials Budget
 +Direct Labor Budget
 +Overhead Budget
 =Total Manufacturing Cost
 + Beginning WIP
 -Ending WIP
 =Cost of Goods Mfg
 DON’T
USE PAGE 383 IN THE TEXTBOOK.
 Variable
 Fixed
Costs (per unit)
Costs ( same amount each month)
Beginning Cash
 +Cash Receipts Budget
 = Total Cash incoming

Cash Disbursement Budget
 +Direct Labor Budget
 +Overhead Budget
 +S G&A Budget
 = Total Cash outgoing

Cash incoming – Cash outgoing = Cash excess
 -Minimum required balance
 = Cash Available

 Sales
Budget
 -COGS



Beginning FG
+COGM Budget
-Ending FG
 Gross
Profit
 - Selling G&A Budget
 = Net Income
Cash Budget
 A/R (Leftovers from Cash Receipts)
 Inventory (ending FG)
 Net Property,Plant & Equipment (estimate)
 =Total Assets
 A/P (leftovers from DM budget)
 Long Term Liabilities (estimate)
 =Total Liabilities
 Common Stock (estimate)
 Retained Earning (estimated)
 +Net Income from Income Statement
 = Stockholder’s Equity
 =Total Liabilities and Stockholder’s Equity


See Manufacturing project instructions to
create your groups fluid spreadsheet.