【正文】 Sons Australia, Ltd BUDGETING BASICS ? A budget is formal written statement of management’s plans for a specified future time period, expressed in financial terms ? Accounting information provides historical data on revenues, costs, and expenses ? Accountants … – use budgets to express management’s plans in financial terms. – prepare periodic budget reports PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 2 The benefits of budgeting 1. Requires all levels of management plan ahead 2. Provides definite objectives for evaluating performance 3. Creates an early warning system for potential problems 4. Facilitates coordination of activities within the business 5. Promotes management awareness of the entity’s overall operations 6. Motivates personnel throughout anisation to meet planned objectives PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 3 LO1 Essentials of effective budgeting ? Depends on sound anisational structure – Authority and responsibility for all phases of operations must be clearly defined ? Based on research and analysis – Realistic goals that will contribute to the growth and profitability of the pany ? Directly related to acceptance by all levels of management PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 4 LO2 Length of the budget period ? A budget may be prepared for any length of time ? The budget period must be long enough to provide an attainable goal under normal business conditions ? The most mon budget period is one year ? Many panies supplement this with quarterly or monthly budgets PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 5 The budgeting process ? Budgeting starts with a sales forecast ? Sales forecasting depends on … – General economic conditions – Industry trends – Market research studies – Anticipated advertising and promotion – Previous market share – Changes in prices – Technological developments ? Many panies coordinate budget preparation by a budget mittee PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 6 Budgeting and human behaviour ? There will be a strong positive influence on a manager when: – Each level of management is invited and encouraged to participate in developing the budget – Criticism of a manager’s performance is tempered with advice and assistance – Top management is sensitive to the behavioural implications of its actions PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 7 Budgeting and longrange planning ? Longrange planning is a formalised process of … – Selecting strategies to achieve longterm goals, and – Developing policies and plans to implement the strategies ? Usually enpasses 35 years ? Longrange budgets … – Contain less detail than annual budgets – Have a strategic emphasis PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 8 The master budget ? The master budget is a set of interrelated budgets ? It consists of 2 types of budgets: – Operating budgets (sales and production) which lead to the budgeted ine statement – Financial budgets (cash budget and budgeted statement of financial performance) that are concerned with cash resources for expected operations and capital expenditure PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 9 LO3 The master budget continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 10 PREPARING THE OPERATING BUDGETS 1. Sales budget 2. Production budget 3. Direct materials budget 4. Direct labour budget 5. Manufacturing overhead budget 6. Selling and administration expense budget 7. Cash budget PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 11 Sales budget ? The sales budget is based on the forecast of sales revenue for the budget period ? It acts a starting point for the master budget ? It shows expected unit sales volume times anticipated unit selling price ? It sets activity levels for other functions (., production, purchasing) PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 12 Sales budget continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 13 Q1 Q2 Q3 Q4 Year. Expected unit sales 3 000 3 500 4 000 4 500 15 000 Unit selling price $60 $60 $60 $60 $60 Total sales $180 000 $210 000 $240 000 $270 000 $900 000 HAYES PTY LTD Sales Budget for the year ending 31 December 2020 Production budget ? The production budget shows the units to be produced in order to meet expected sales ? It involves realistic estimates in order to avoid insufficient or excessive ending inventory PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 14 Budgeted sales units Beginning finished goods units Required production units + = Desired ending finished goods inventory + Production budget continued PowerPoint presentation by Dr Anne Abraham, University of Western Sydney 15 Q1 Q2 Q3 Q4 Year Expected unit sales 3 000 3 500 4 000 4 500 Add: Desired ending FG inventory (units) 700 800 900 1 000 Total required units 3 700 4 300 4 900 5 500 Less: Beg FG inventory 600 700 800 900 . Req’d production units 3 100 3 600 4 100 4 600 15 400 HAYES PTY LTD Production