Acc 122 Grading Rubric: Comprehensive Budget 100 Points

Acc122grading Rubriccomprehensive Budget100 Pointsitempoints Possiblep

Complete a comprehensive and cash budget, including the sales budget, production budget, direct materials purchases budget, direct labor budget, overhead budget, selling and administrative budget, cost of goods manufactured budget, budgeted income statement, and cash budgets (receipts, payments, and finalization). Ensure all required elements are accurately completed. Use effective Excel spreadsheet organization with proper headings to present each component clearly, covering a three-month period.

Paper For Above instruction

The development of a comprehensive business budget is a fundamental aspect of financial planning for any organization. It provides a detailed financial roadmap that guides management decisions, ensures financial stability, and supports strategic objectives. The assignment entails preparing a complete and integrated budget package that includes sales forecasts, production plans, purchase requirements, labor needs, overhead costs, selling and administrative expenses, and ultimately, a financial statement portraying expected profitability. Alongside these elements, detailed cash budgets for receipts and payments for a three-month period are required, along with a final cash budget summary. Proper organization and presentation using Excel spreadsheets are essential to facilitate clarity, accuracy, and usability of the budget data.

Introduction

Effective budgeting is central to managing a company's financial health. A comprehensive budget encompasses all operational facets to predict future performance accurately. This paper will detail the step-by-step process of creating such a budget, including the preparation of each component and highlighting best practices in spreadsheet formatting for clarity and efficiency.

Sales Budget

The first step in the budgeting process is developing a sales budget, which forecasts expected sales volume and revenue for the upcoming period. Accurate sales forecasting involves analyzing historical sales data, market trends, economic indicators, and sales strategies. The budget should specify projected sales units and revenues for each month, ensuring all assumptions are documented to facilitate adjustments and variance analysis. The sales budget serves as the foundation for all subsequent budgets as it influences production, purchasing, and cash flow estimations.

Production Budget

Following sales projections, the production budget determines the units that must be manufactured to meet sales demands while maintaining adequate inventory levels. It considers beginning inventory, desired ending inventory, and sales forecasts. The production units are calculated to ensure inventory buffers are maintained without excessive stockpiles, optimizing storage costs and reducing waste. All key elements such as unit costs and production schedules are included to prepare for material and labor requirements.

Direct Materials Purchases Budget

Based on the production budget, the direct materials purchases budget calculates the raw materials needed for production. It considers the bill of materials for each product, desired ending inventory, beginning inventory, and purchase discounts or lead times. This detailed planning ensures that sufficient materials are available when needed, avoiding production delays and stockouts. The budget also incorporates cost estimations for purchasing and ordering, critical for cash flow management.

Direct Labor Budget

The direct labor budget estimates the labor hours and wages required to produce the forecasted units. It is derived from standard labor times per unit, adjusted for attainable efficiencies. The budget includes hourly wage rates, required shifts, and overtime considerations, providing a clear projection of labor costs that influence both production and payroll expenses.

Overhead Budget

Overhead costs encompass all indirect expenses related to manufacturing, such as utilities, depreciation, maintenance, and factory supplies. This budget itemizes projected overhead expenses, segregates fixed and variable costs, and estimates total overhead for each month in the budget period. Accurate overhead budgeting allows for proper allocation and control, ensuring product costing and profitability analysis are reliable.

Selling and Administrative Budget

This budget forecasts the expenses associated with selling, marketing, and administrative functions. It includes salaries, commissions, advertising, office supplies, and administrative overhead. Each expense category is estimated for the period, often based on historical data or projected activity levels. Efficient planning of these costs is vital for maintaining operational effectiveness without overspending.

Cost of Goods Manufactured Budget

The cost of goods manufactured (COGM) consolidates the direct materials, direct labor, and manufacturing overhead costs incurred during production. This budget prepares a detailed calculation of total manufacturing costs, adjusted for beginning and ending inventories of work-in-progress, providing a crucial link between production and cost accounting.

Budgeted Income Statement

Using all previous budgets, a forecasted income statement is prepared to estimate profitability. Revenues are based on the sales budget, while expenses include cost of goods sold (derived from COGM), selling, and administrative expenses. This statement provides a comprehensive view of expected net income, vital for evaluating financial viability and setting performance benchmarks.

Cash Budget: Receipts, Payments, and Finalization

The cash budget details anticipated cash inflows and outflows during the upcoming months. The receipts section estimates cash collections from sales, factoring in credit terms and collection patterns. The payments section includes cash disbursements for purchases, wages, overhead, and other expenses. Finalizing the cash budget involves adjusting for beginning cash balances to project ending cash balances, ensuring liquidity management aligns with operational needs.

Spreadsheet Organization

Throughout this process, Excel spreadsheets should be used effectively, employing individual worksheets or a well-organized single worksheet with clear, descriptive headings. Proper formatting, such as consistent number formats, labeled rows and columns, and logical grouping of related data, enhances readability and facilitates data analysis. Effective spreadsheet design ensures the budget is a useful management tool, enabling scenario analysis and variance reporting.

Conclusion

The preparation of a comprehensive budget is a systematic process that integrates various financial plans into an overall framework. It provides insights into expected operational performance and cash flow, serving as a basis for strategic decision-making. Proper attention to detail, accurate data collection, and effective use of spreadsheet tools are essential for developing a reliable budget that supports organizational success.

References

• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education.
• Drury, C. (2018). Management and Cost Accounting (O. Sullivan, Ed.). Cengage Learning.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2019). Introduction to Management Accounting. Pearson.
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting (11th ed.). Wiley.
• Blocher, E., Stout, D., Juras, P., & Cokins, G. (2019). Cost Management: A Strategic Emphasis (8th ed.). McGraw-Hill Education.
• Libby, T., Libby, R., & Short, D. G. (2020). Financial Accounting (9th ed.). McGraw-Hill Education.
• Kaplan, R. S., & Atkinson, A. A. (2015). Advanced Management Accounting. Pearson.
• Anthony, R. N., Hopwood, P. G., & Merino, B. W. (2019). Management Control Systems. McGraw-Hill Education.
• Shim, J. K., & Siegel, J. G. (2020). Financial Management Accounting & Control. Barron's Educational Series.
• Shapiro, B. P. (2022). Managerial Accounting. Wiley.