# Profit Planning

83 views1 pages
Published on 17 May 2011
School
Ryerson University
Department
Accounting
Course
ACC 406
Professor
Chapter 9 Budgeting Process of preparing budgets
Types of Budgets:
Operational Budget
oSales Budget How many units to be sold (Determines Production Budget)
oProduction Budget How many units to be produced (Determines Input
Budgets)
oInput Budgets:
Direct Material Purchases Budget Estimates Direct Materials Cost
Direct Labor Budget Estimates Direct Labor Cost
Financial Budget
oCash Budget Estimates cash in/outflow (Receipt/Payments)
oProjected Income Statement Estimate revenue and expenses
oProjected Balance Sheet
Problem 9-50 Sales Cash Collation Pattern Sales
35% Cash
Sales65% credit sales
60% collected in the
same month of sale20% collected
next month20% collected
2 months later
50% with
2% cash
discount
50% without
cash discount
d) Cost-to-sales ratio: 22:1
Monthly ending inventory equal to coming months production requirements
Purchase Payments
50% paid in the same month 50% paid next month
Julys Credit Sales = 60%
Junes Credit Sales = 20%
Mays Credit Sales = 20%
Old equipment sold in July for \$25,200
Purchase for July Sales (1,140,000 * 0.22) = \$250,800
Add: Required Ending Inventory = \$264,000
Total Need = \$514,800
Less: Beginning Inventory (1,140,000 * 0.22) = \$250,800
July Purchases = \$264,000
*50%
Cash Outflow Because of July Purchase = \$132,000
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