Budgeting and decisions

1
Budgeting and decisions

• Sales
• Finished Goods Ending Inventory
• Production
• Raw Materials purchases
• Factory Workers- labor cost
• Cost of Goods Manufactured
• Selling Expense
• General and Administrative
• Income
• Cash
• Balance Sheet

2
Sales

• Dependent on Decisions
• Territories
• Price
• Credit terms
• Market potential

3
Finished Goods Ending Inventory

• Determine desired level to carry forward to avoid
  stock outs but also avoid excess

4
Production

• Desired ending inventory plus sales less
  beginning inventory(carryover from prior month)

5
Raw Materials

• Amount to purchase
• Cost
• Supplier X
• Order size X
• of orders
• Order size Y
• orders

6
Factory workers

• Wage rate (as this increases productivity goes
  up)
• of workers (more workers more units possible)
• overtime/second shift (can also increase
  production)
• Labor cost
• Can also install more equipment

7
Cost of goods manufactured

• Materials, Labor and Variable overhead

8
Selling expense budget

• Advertising
• Sales salaries
• of sales people
• Commission rate

9
Gen Admin budget

• Variable and fixed

10
Income statement

• Flows from prior budgets
• Sales
• Cost of sales
• Gross margin
• Selling
• GA expenses
• Etc
• If outcome not favorable may want to revise
  decisions

11
Cash budget

• Check for shortage
• If short may need to borrow or issue stocks or
  bonds..can also factor receivables.
• If excess can pay dividends, etc

12
Balance sheet

• Follows from prior budgets
• If outcome not favorable may want to revise
  decisions