高顿财经CMA讲义——Budget Methodologies and Budget Preparation-3

Expected Cash Disbursement for

Materials

üRoyal pays $0.40 per pound for its materials.

üOne-half of a month’s purchases is paid for in the month of purchase; the other half is paid in the following month.

üThe March 31 accounts payable balance is $12,000. Let’s calculate expected cash disbursements.

Expected Cash Disbursement for

Materials

The Direct Labor Budget

üAt Royal, each unit of product requires 0.05 hours (3 minutes) of direct labor.

üThe Company has a “no layoff” policy so all employees will be paid for 40 hours of work each week.

üFor simplicity, we’ll assume that workers are paid $10 per hour regardless of the hours worked (No overtime pay).

üFor the next three months, the direct labor workforce will be paid for a minimum of 1,500 hours per month.

üLet’s prepare the direct labor budget.

The Direct Labor Budget

Manufacturing Overhead Budget

üAt Royal manufacturing overhead is applied to units of product on the basis of direct labor hours.

üThe variable manufacturing overhead rate is $20 per direct labor hour.

üFixed manufacturing overhead is $50,000 per month and includes $20,000 of noncash costs (primarily depreciation of plant assets).

Let’s prepare the manufacturing overhead budget.

Manufacturing Overhead Budget

Depreciation is a noncash charge.

Ending Finished Goods Inventory Budget

Selling and Administrative Expense

Budget

üAt Royal, the selling and administrative expenses budget is divided into variable and fixed components.

üThe variable selling and administrative expenses are $0.50 per unit sold.

üFixed selling and administrative expenses are $70,000 per month.üThe fixed selling and administrative expenses include $10,000 in costs –primarily depreciation –that are not cash outflows of the current month.

Let’s prepare the company’s selling and administrative expense budget.

Selling and Administrative Expense

Budget