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Slide 2 Assigned Exercises & Problems, Ch 13: Budgeting Slide 3 13-19: Estimate Sales Revenues Market size and our share of market Our forecast = share x (total forecasted market) Market size last year? 30%(total market) = 45,000 units; total market = 150,000 units Market size next year = 110% x 150,000 units = 165,000 units Company share = 25% x 165,000 units = 41,250 units Sales revenue = 41,250 units x $11 per unit = $453,750 Slide 4 13-19: Estimate Sales Revenues Stated otherwise: (25/30) x 110% x 45,000 = 41, 250 units I.e., we receive 25/30 of what we would have received when the market increased 10% Slide 5 13-24: Estimate Production and Materials Requirements Expected sales.................................... 160,000 Add: Desired EI of FG.............................. 5,000 Total needs......................................... 165,000 Less: BI of FG..................................... 20,000 =Units to produce.............................. 145,000 Our material needs will follow from this. Slide 6 13-24: Materials Requirements Slide 7 13-24: Alternate Viewpoint Production: BB + Production = Sales + EB 20,000 + P = 160,000 + 5,000 Production = 145,000 units Materials Requirements: BB + Purchases = Usage + EB 60,000 + P = (6 x 145,000) + (2 / 12) x 160,000 x 6 oz. Purchases = 970,000 oz. Slide 8 13-26: Estimate Purchases And Cash Disbursements Note: 10,000 in March @$45 = $450,000; 60% x $450,000 = $270,000 was paid in March 40% x $450,000 = $180,000 will be paid in April Slide 9 13-29: Estimate Cash Collections Current month, etc. Slide 10 13-39: Sensitivity Analysis Slide 11 Ctrl ~ discloses formulas in Excel Or: =45000+5*MAX(0,B11-4500) Slide 12 Pr. 13-44: Production Budget CHANDER, INC. Bag production cost data: Direct materials per bag: Chander, Inc. Yards of cotton 1.000 Production Budget Cost of cotton per yard $ 3.00 Coming Year Yards of canvas finish 0.200 Expected sales 270,000 units Cost of canvas per yard $ 10.00 Add: Desired ending inventory of finished goods 105,000 units Direct labor per bag: Total needs 375,000 units Number of hours 0.500 Less: beginning inventory of finished goods 60,000 units Cost per hour $ 16.00 Units to be produced 315,000 units Overhead per bag: Indirect labor $ 0.50 Estimate of costs: Indirect materials $ 0.15 Direct materials: Power $ 0.30 Cotton $1,134,000 Equipment costs $ 1.25 Canvas 630,000 Building occupancy $ 0.80 Total direct materials 1,764,000 Total overhead per bag $ 3.00 Direct labor $2,520,000 Overhead: Additional Information: Indirect labor $ 157,500 Normal annual production in units 300,000 Indirect materials $ 47,250 Annual plant capacity in units 375,000 Power $ 94,500 Percentage increase in cost of cotton20% Equipment costs $ 375,000 Expected sales in coming budget period 270,000 Building occupancy $ 240,000 Current finished goods inventory in units 60,000 Total overhead $ 914,250 Targeted finished goods inventory in units 105,000 Total budgeted production costs $5,198,250 Slide 13 13-44: Production Budget Continued Slide 14 13-48: Comprehensive Budget Plan Slide 15 13-48: Budgeted material purchases BI + Purchases - Used Slide 16 13-48: Budgeted Income Statement, May See top of p. 524