Module+7000+XVI+Formulas

XVI. Module 7000 Formulas jcb 


 * •Sales Budget **

Sales = Units (for each Month, Quarter, etc)

 x Unit Selling Price


 * •Production Budget **

Units Produced = Unit Sales (for Month, Quarter, etc)

+Desired Ending Inventory/Finished Goods (Total Needed)

-Beginning Inventory/Finished Goods


 * •Direct Materials Purchases Budget **

Total Purchase Cost = Units Produced

 x Direct Materials per Unit = (Production Needs)

 + Desired Ending Inventory = (Total Needed)

-Beginning Inventory = (Units Produced)

 x Cost per Units Produced

 **__Three Individual Breakdowns:__**

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> a. Quantity of Material Needed for Production

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = (Units to be Produced)(Quantity of Material Budgeted per Unit)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> b. Quantity of Material to be Purchased

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = Quantity of Material Needed for Production

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> + Desired Ending Material - Beginning Material

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> c. Budgeted Cost of Material Purchases

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = (Quantity of Material to be Purchased)(Budgeted Material Prices)


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Direct Labor Budget **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Total Direct Labor Cost = Units Produced

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">x Direct Labor per Unit = (Direct Labor Hours Needed)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> x Cost per Direct Labor Hour

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> **__Two Individual Breakdowns:__**

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> a. Direct Labor Hours Needed For Production

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = (Units to be Produced)(D.L. Hours Budgeted per Unit)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> b. Budgeted Direct Labor Cost

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = (D.L. Hours needed for Production)(Budgeted Rates Per Hour)


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Overhead Budget **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Total Overhead Cost = Budgeted Direct Labor Hours

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> x Variable Overhead Rate = (Budgeted Variable Overhead)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> + Budgeted Fixed Overhead


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Ending Finished Goods Inventory Budget **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Total Ending Inventory = Units of Ending Inventory <span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> x Unit Cost

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Unit Cost = Direct Materials Cost per Unit

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">+ Direct Labor Cost per Unit

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">+ Total Overhead Cost per Unit (Budgeted Variable Overhead Cost + Budgeted Fixed Cost per Unit)


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Cost of Goods Sold Budget **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Cost of Goods Sold = Total Manufacturing Cost (Total Budgeted Direct Materials Cost + Total Budgeted Direct Labor Cost + Budgeted Total Overhead Cost)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> + Beginning Inventory/Finished Goods

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">-Ending Inventory/Finished Goods


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Marketing Expense Budget **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Total Marketing Expense = Total Variable Marketing Expense (If any; Ex: Commision, freight, supplies)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">+ Total Fixed Marketing Expense (Salaries, Depreciation, Travel, Advertising, Marketing Research, Customer Service Training)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Total Variable Marketing Expense = Each Unit Variable Marketing Expense

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> x Budgeted Unit Sales


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">•Budgeted Income Statement **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">Net Income = Sales

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> - Cost of Goods Sold = (Gross Margin)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> - Marketing Expense

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> - Administrative Expense = (Operating Income)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> - Interest Expense (If Provided) = (Income Before Taxes)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> - Income Taxes (Income Before Taxes x Tax Rate)

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> **__Four Individual Breakdowns:__**

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> a. Budgeted Sales $ - Budgeted Cost of Goods Sold

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = Budgeted Gross Profit

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">b. Budgeted Gross Profit - Budgeted Selling & Administrative Expenses

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = Operating Income

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">c. Operating Income - Interest Expense - Bad Debts Expense

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = Net Income Before Taxes

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">d. Net Income Before Taxes - Income Taxes

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;"> = Net Income After Taxes


 * <span style="font-family: 'Times New Roman','serif'; font-size: 16px;">References **

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">1. Martin, James R. “Chapter 9 The Master Budget or Financial Plan”. __Maaw.info__. July 2, 2011 < http://maaw.info/Chapter9.htm>.

<span style="font-family: 'Times New Roman','serif'; font-size: 16px;">2. Hansen, D.R., & Mowen, M. M. (2011). Cornerstones of Cost Accouting. Mason, OH: South-Western, Cengage Learning.