tailieunhanh - Lecture Advanced management accounting - Chapter 31

After studying chapter 5, you should be able to: Explain how changes in activity affect contribution margin and net operating income, prepare and interpret a cost volume-profit (CVP) graph and a profit graph, use the contribution margin ratio (CM ratio) to compute changes in contribution margin and net operating income resulting from changes in sales volume,. | Lecture 31: Budgetary planning and customer profitability analysis Reference: Managerial Accounting 6th edition by Weygandt, kimmel, kieso First budget prepared. Derived from the sales forecast. Management’s best estimate of sales revenue for the budget period. Every other budget depends on the sales budget. Prepared by multiplying expected unit sales volume for each product times anticipated unit selling price. Preparing the Operating Budgets Sales Budget 2 Expected sales volume: 3,000 units in the first quarter with 500-unit increases in each succeeding quarter. Sales price: $60 per unit. Illustration – Hayes Company Preparing the Operating Budgets 3 4 Shows units that must be produced to meet anticipated sales. Derived from sales budget plus the desired change in ending finished goods inventory. Essential to have a realistic estimate of ending inventory. Preparing the Operating Budgets Production Budget 5 Hayes Co. believes it can meet future sales needs with an ending inventory of 20% of next quarter’s sales. Illustration – Hayes Company Preparing the Operating Budgets 6 Becker Company estimates that 2014 unit sales will be 12,000 in quarter 1, 16,000 in quarter 2, and 20,000 in quarter 3, at a unit selling price of $30. Management desires to have ending finished goods inventory equal to 15% of the next quarter’s expected unit sales. Prepare a production budget by quarter for the first 6 months of 2014. 7 Shows both the quantity and cost of direct materials to be purchased. Formula for direct materials quantities. Direct Materials Budget Budgeted cost of direct materials to be purchased = required units of direct materials x anticipated cost per unit. Inadequate inventories could result in temporary shutdowns of production. Preparing the Operating Budgets 8 Because of its close proximity to suppliers, Hayes Company maintains an ending inventory of raw materials equal to 10% of the next quarter’s production requirements. The manufacture of each Rightride . | Lecture 31: Budgetary planning and customer profitability analysis Reference: Managerial Accounting 6th edition by Weygandt, kimmel, kieso First budget prepared. Derived from the sales forecast. Management’s best estimate of sales revenue for the budget period. Every other budget depends on the sales budget. Prepared by multiplying expected unit sales volume for each product times anticipated unit selling price. Preparing the Operating Budgets Sales Budget 2 Expected sales volume: 3,000 units in the first quarter with 500-unit increases in each succeeding quarter. Sales price: $60 per unit. Illustration – Hayes Company Preparing the Operating Budgets 3 4 Shows units that must be produced to meet anticipated sales. Derived from sales budget plus the desired change in ending finished goods inventory. Essential to have a realistic estimate of ending inventory. Preparing the Operating Budgets Production Budget 5 Hayes Co. believes it can meet future sales needs with an ending inventory .