Question

Develop and use accounting information for daily recording of business financial transactions in a manufacturing environment, and construct and use operational budgets for a manufacturing company

Answer 1

Accounting plays a critical role in decision-making.Accounting provides the financial framework for analyzing the results of an executed set of decisions and makes possible the continuous success of a business or improvement in operations.
Secondly, accounting provides much of the necessary information needed in making good decisions. Thirdly, the management accountant provides a knowledge of basic decision-making tools that helps find the best alternative in decision-making.

A primary objective of a business is to increase the assets from operations. By operations is meant all the revenue and expense transactions of a business for a defined period of time. Since the excess of revenue over expenses (net income)
increases the equity of a business, it is often said that the primary objective is to increase stockholders’ wealth, assuming the business is a corporation. The success
of a business in financial terms, then, depends on how well management manages revenues and expenses. In other terms, the decisions that management makes concerning the operations of the business are of paramount importance. Management has the responsibility to make the kinds of decisions that generates net income.

The operating budgets include the budgets for sales, manufacturing costs (materials, labor, and overhead) or merchandise purchases, selling expenses, and general and administrative expenses

The sales budget is the starting point in putting together a comprehensive budget for a business. It includes the number of units to be sold and the selling price per unit

Direct materials budget. The direct materials budget determines the number of units of raw materials to be purchased. It uses the number of units to be produced from the production budget, the required level of ending inventory for raw materials, and the number of units in beginning inventories

Direct labor budget. The direct labor budget shows the number of direct labor hours and the cost of the labor to determine the total cost of direct labor.

Manufacturing overhead. The manufacturing overhead budget identifies the expected variable and fixed overhead costs for the year (or other period) being budgeted.

The general and administrative expenses budget details the variable and fixed operating expenses for the general and administrative areas of the company