Simple Budget Preparation - Budgeting Has Never Been Easier

1. Course introduction: with discourse, you take a close look at the process of budget preparation. It consists of just a little bit of theory and more practice. The heart of the course is a case study with solutions, which show the my steps in budgeting. On Lee, the 1st 2 lessons present some short theory are other lessons represent a practical explanation of each type of budget. The main idea of the course is to explain the process of budgeting simply in this way, everybody can understand the logic of budgeting and gain confidence in this field. 2. Short Theory 1: we can say that a budget is a plan of action relating to a given period of time, but I think is very important for every business because it is the base for planning and controlling future activity. It helps managers to define targets which they will aim to achieve. Without a formalized plan, the organization will lack direction and managers will not be aware of their own targets and responsibilities to ensure that the company continues on the right course majors compare the actual result with the budgetary plan. This allow them to take appropriate action to correct any deviations from the plan. 3. Short Theory 2: For example, if the principal budget factor is the level off demand, a sales budget will be prepared first. If the principal budget factor is the availability from materials, a material budget will be prepared first. We suppose that the limitation factor is the level of activity. In this case, the first budget that should be prepared is the South budget on the base of the cells budget majors camp time, the production units for Gaea and they can prepare a production budget. Now the company is in a position toe, estimate its material and labor requirements and create a materials usage budget, a material purchase budget and a labour budget. When all the individual budgets have been prepared, they can be used for preparation off a product cost budget and a budgeted income statement . 4. Case study : a company produces a single president. It expects to sell 2000 units of the product at the price of 150 doors for the coming accounting period. Budgets are to be prepared using the following information standard usage from materials material. A took your gram per unit at the press off, $8 per cuchara and material be want you gram per unit at the price for doors back you Graham Opening inventory of finished goods 700 unit with Dato Value $19,000 and closing in battery of finished goods at 100 units Opening King Venturi off material. A 2000 and 100 kilograms with Otavalo off $15,000. Opening inventory of material be 1000 kilograms. With the auto Vallo off $6000 you closing invent tree off material. A 1000 and 800 kilograms on closing King Venturi. Off material be 900 kilograms. Skilled labor is paid at the rate of $5 per hour and unskilled labor is paid ad rate after a the worst per hour. The company expects selling costs for the period at Otavalo $25,000. We're going to profess that by step, all necessary individual budget 5. Sales budget: In this case, the limit factor is the volume of cells, the logic that we should follow in budgets. Preparation is the following. The sales budget determines production requirements, which in turn determines material usage on one hand and labour hours. On the other hand, the material usage budget in turn determines materials purchases. Using the information from all of this individual budget, we can forecast a product called Budget and on income Statement. Sales budget shows how many units a company expects to sell the price at which it expects to sell its production and the expected level off revenue that it will receive. 6. Production budget: the production budget shows how many units are expected to be produced. The budgeted production in unions is equal to the sum off budgeted sales volume and the finished goods available at the end of the period. Deduct it with the finished goods of elbow at the beginning of the period. 7. Material usage budget: we have already found the expected production quantity and we can prepare a mature usage budget. We calculate how many units of material A and material be the company needs to produce the plant. 2000 and 100 units production. For this purpose, we should multiply the projected production by the quantity of each material consumed for one unit production. 8. Material purchase budget: the material purchase budget shows how many materials are expected to be purchased. The budgeted material purchase in units is equal to the sum off budgeted materials required for production on the budgeted Matures Available Idea Anthems period. Deduct it with the materials of elbow at the beginning of the period. After that, we can find the value of material perches. We multiplied the budgeted material purchase by the cost per unit for each material. 9. Labour budget: the labour budget helps as to calculate how many skilled and unskilled labor the company needs to produce the plant. 2000 and 100 units production. We multiply the projected production units by the quantity of each labor. They come for one unit production. We find that the projected production requires a 2000 and 400 skilled labour hours and 6000 and 300 unskilled labour hours. Now we can find the cost of the required label. We multiply the required skilled and unskilled labour hours by the cost per one neighbor. Our the cost of the required skilled labor is $42,000 and the cost of their quite unskilled labor is 18,000 and $900. 10. Production cost budget: the production cost budget expresses information about the cost of the total required production on the cost per unit finished. Good To prepare the production cost budget, we use the information from all budgets that we have already made. We think the required quantity of materials from the material's budget and we multiply these two quantities by the standard price per unit for each material. After that, we take the cost off labour from the labour budget with him the cost of skilled and unskilled labor. And we find that the daughter labor cost is 60,000 and $900 now with some the total material cost and the total labor cost, and to get the total cost of finished goods, it is 102,000 and $900. After that, we divide the total cost by the expected production units and we see that the cost per unit finished goat is $49 11. Budgeted income statement: after we have prepared several individual budgets, we can make a step forward and prepare budgeted income statement in which o information issue in money terms First with take information from the filth revenue budget and show the expected level off revenues $300,000. Next, we show the total cost of opening can Venturi off the two materials used for the production process. This information is shown in the balance sheet from the previous year $21,000. The next step is to take a look at the material purchase budget and see the total value off required matures purchases. It is 3000 and $200. Now We take the total cost of skilled and unskilled labor from the liberal budget 60,000 and $900. We need to find the cost of the expected closing commander of materials with now that the company plants are causing inventory of 1000 and 800 kilograms from material A and 900 kilograms from material be when all the expected price of one kilogram from each material and we moved by the quantity expected with the prices then we from the cost of closing elementary for both materials and get the result of $19,000 to find the cost of finished goods within the opening. Inventor of materials, the cost off purchase of materials and the cost of required labor. Then we did it. The result by the wall of the building You mentor of materials. We find that the cost of finished goods is 60 70,000 and $100. We take the cost of opening inventory of finished goods from the balance sheet from the previous year. It is $19,000 go like the cost of causing inventor of finished goods. We take the expected quantity of courting, finish coat and multiply by the cost of unit required production. This information we take from the production cost budget the cost of causing in my country is 39,000 and $200 The cost of goods out if he called to the sum of opening inventor of finished goods and the cost of goods completed during the period detected by the cost of causing que matter are finish court. We find that the cost of good shot is 46,000 and $900. We have the expect level private, new and the expected cost of goods sold so we can find the gross profit the gross profit is equal to. They expect revenues. Maya's, they expected cost of good shot. We find that the gross profit is 263,000 and $100. After that, we sector the expected period costs from the gross profit, and we get that. The profit before taxes is 400 28,000 and $100. Let's assume led the level of income tax is 20% from the prophet before income taxes. We find that the income tax is a $45,620. We subtract the income tax from the prophet before income taxes, and we see that the expected net profit is 100 $82,480.