Chapter 22 Master Budgets and Planning

Units to produce (production budget)

Budgeted sales units + Desired ending finished goods inventory units - Beginning finished goods inventory units

Materials to purchase (direct materials budget)

(Units to produce x materials required per unit) + Desired ending materials inventory - beginning materials inventory

Cost of direct labor

Units to produce x Direct labor hours required per unit x direct labor cost per hour

Budgeted variable overhead

Direct labor hours x variable overhead rate per direct labor hour

Fixed overhead per unit

Total fixed overhead per month / units of expected production per month

Total product cost per unit (budgeted cost of goods sold)

Direct materials per unit + direct labor per unit + variable overhead per unit + fixed overhead per unit

Budgeted cost of goods sold

Budgeted sales units x product cost per unit

Cost of goods sold

Beginning inventory + purchases - ending inventory

Total selling expenses (selling expense budget)

(budgeted sales (from sales budget) x sales commission percentage) + salary for sales manager + advertising if any

Preliminary cash balance (cash budget)

Beginning cash balance + Budgeted cash receipts (such as cash receipts from sales) - Budgeted cash payments

Units to purchase (merchandise purchases budget for a merchandising company)

Budgeted sales units + Desired ending merchandise inventory units - Beginning merchandise inventory units.