Question

Assume that you work in a manufacturing company located in USA. You are required to prepare a budget for your company for 2021. The budgets should be done in quarters. The following budgets need to be prepared:

1. Sales budget

2. Production budget

3. Direct material budget

4. Direct labour budget

5. Manufacturing overhead budget

6. Selling and administrative expense budget

7. Budgeted Income Statement

8. Detail cash budget including Schedule of Expected collection and payments for DM

9. Budgeted Balance sheet

Answer 1

A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.

1.SALES BUDGET

A sales budget is an analysis of a company's sales target for a particular period. This can be accomplished by determining your goals and targets every year. Sales budget is consolidated every month or for every quarter to estimate the number of sales and expected price for each unit that is sold.

2. PRODUCTION BUDGET

The production budget calculates the number of units of products that must be manufactured, and is derived from a combination of the sales forecast and the planned amount of finished goods inventory to have on hand (usually as safety stock to cover for unexpected increases in demand).

3.DIRECT MATERIAL BUDGET

The direct materials budget calculates the materials that must be purchased, by time period, in order to fulfill the requirements of the production budget. It is typically presented in either a monthly or quarterly format in the annual budget

4. DIRECT LABOUR BUDGET

The direct labor budget is used to calculate the number of labor hours that will be needed to produce the units itemized in the production budget. ... The direct labor budget is useful for anticipating the number of employees who will be needed to staff the manufacturing area throughout the budget period

5. MANUFACTURING OVERHEAD BUDGET

A manufacturing overhead budget contains all the costs, other than raw materials and labor, that will be incurred by a manufacturing company or department during a fiscal year. These ongoing costs are a valid part of manufacturing expenses you incur and should be calculated as part of your manufacturing budget.

6..SELLING AND ADMINISTRATIVE EXPENSE BUDGET

Selling and administrative expense budget is a schedule of planned operating expenses other than manufacturing costs. It is a component of master budget and it is prepared by all types of businesses (i.e. manufacturers, retailers and service providers) before the preparation of budgeted income statement.

7.BUDGET INCOME STATEMENT

An income statement for a business reports its earnings and expenses for a given period of time, typically by the month, quarter or year. A budgeted income statement is simply a predicted income statement for a future period of time, and is also called a pro forma income statement.

8.CASH BUDGET

Cash budget After the preceding analyses have been prepared, sufficient information is available to prepare the cash budget and compute the balance in the Cash account for each quarter. Preparing a cash budget requires information about cash receipts and cash disbursements from all the other operating budget schedules.

9. Budgeted Balance sheet

budgeted balance sheet is a report that management uses to predict the levels of assets, liabilities, and equity based on the budget for the current accounting period.

Budgeted Balance Sheet Definition The budgeted balance sheet contains all of the line items found in a normal balance sheet, except that it is a projection of what the balance sheet will look like during future budget periods.