Sales Budget Number of units to be sold x Sales price per unit Total sales revenue For Cash Collections create chart and separate cash credit for each month For quarter just total all months totals Production Budget COGS for Merch Units projected for sales Desired ending inventory Total units needed Units in beginning inventory Units to produce Production Budget Direct Labor Budget Units to be produced x DLH per unit Total DLH needed x Cost per DLH Total Direct Labor Cost Beginning inventory previous month s ending inventory Quarter beginning inventory is from the first month Ending inventory for quarter comes from last month in group Cash Payments Budget Cash payment for DM Cash payment for DL Cash payment for MOH Cash payment for Operating Expense Cash payment for Taxes Total Cash Payments Direct Materials Budget Units to be Produced x Quantity lbs of DM needed per unit Quantity of DM needed for production Desired DM ending inventory Total quantity of DM needed DM beginning inventory Quantity of DM to purchase x Cost per pound Total cost of DM purchases Combined Cash Budget Beginning cash balance Cash Collections Total Cash Available Cash Payments Ending Cash Balance Before Financing Minimum Cash Balance desired Ending cash balance after financing All are typically negative Responsibility Centers Cost Center cost only no departments HR Revenue Center Call center offices teams Profit Center Revenues costs franchises separate stores of bigger company Investment Center investments revenues costs stand alone head quarters divisions separate brands entities can be sold off ROI Operating Income Total Assets OR Sales Margin x Capital Turnover ROI Sales Margin Operating Income Sales Capital Turnover Sales Total Assets Fixed MOH Budget Variance Actual Fixed OH Budgeted Fixed OH Fixed MOH Volume Variance If production volume than anticipated fixed overhead has been over allocated and fixed overhead volume variance is favorable If production volume is greater it s under allocated and unfavorable Time Value of Money use PV tables PV of 1 for single payment PV Annuity for equal payments Use N I to find rate then x PV Capital Budgeting Investment large items assets etc Budget Variance Diff of Actual vs Budget Variance Budget Variance Budget Expenses unfavorable Sales favorable Flexible Budget actual units produced using budget prices Volume Variance difference between master budget and flexible budget Flexible Budget Variance difference between flexible budget actual results 4 perspectives of Balanced Scorecard Financial money income shareholders Customer satisfaction Internal Business company innovation operations post sales support new product average repair time Learning Growth employees improvement create value Payback Period Equal CF Amount Invested Expected annual net cash flows Create chart for unequal cash flows Accounting Rate of Return accrual ARR Avg ann net CFs Ann Deprec Exp Initial Investment Annual Depreciation Initial Cost of Investment Residual Value Useful Life of Assets In years Unequal CF compute average CF total DM Price Variance Actual Quantity Purchased x Actual Price Standard Price Quantity Variance Standard Price x Actual Quantity Used Standard Quantity Allowed Actual Cost purchase price amount SQA DM Standard x Amount produced AP SP unfavorable AP SP favorable AQ SQA unfavorable AQ SQA favorable Standard Cost of Direct Materials Standard Quantity DM x Standard Price DM Standard Cost of Direct Labor Standard Quantity DL hours x Standard Price DL purchase Standard Variable MOH per unit Standard Quantity of allocation base x Profitability Index is used in conjunction with the NPV Residual Income RI Operating Income Target rate of return x Total assets Net Present Value NPV Annuity PV Factor x Net Cash Inflow PV Investment NPV 0 accept For Unequal CF NPV use PV for 1 Factor take each CF separately then add together Decentralization Splitting operations into different operating segments frees top management s time duplicates costs Example Smuckers Folgers jam jelly etc Variable MOH Rate spending Variance Actual Hours x Actual Rate Standard Rate Variable MOH Efficiency Variance Standard Rate x Actual Hours Standard Hours Allowed Profitability Index Present value of net cash inflows Investment Internal Rate of Return IRR The interest rate that will cause the PV 0 Annuity PV Factor Investment Annual Net Cash Flows IRR is between and Variable MOH rate Variable MOH rate Total estimated variable MOH Total estimated amount of allocation base Standard Fixed MOH per unit Standard Quantity of allocation base x Fixed MOH rate Fixed MOH rate Total estimated Fixed MOH Total estimated amount of allocation base DL Rate Variance Actual Hours x Actual Rate Standard Rate AR SR unfavorable DL Efficiency Variance Standard Rate x Actual Hours Standard Hours Allowed AH SHA favorable Actual wage rate wages pd actual hours Actual Variable MOH Rate Incurred MOH Variable Incurred DL hours SHA Actual units produced x standard amount of time allowed per unit DL Standard rate x Prep or processed