Accounting Assignment 2

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WORD COUNT
Number of Pages: 23
Number of Words: 4500
Word count is exclusive of the followings:
• Cover Page
• Content Page
• Citation and eferencing
• Conclusion
• !antt Chant
• "ables
• !ra#hs
• "itles$%eadings
&ccounting 2 Page '
TABLE OF CONTENTS
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&ccounting 2 Page 2
3.1: THE PURPOSE AND NATURE OF THE BUDGETING PROCESS
Nowadays, budgeting is considered as the preparation for any company to forecast the
costs, plan for an organisation’s outgoing exenses, revenues that the organisation can
list the objectives and strategies for a specific time period. A good Preparation of
budgeting can give G !urniture many profits to ensure the achievement of the
oranisation’s ojectives" which will be explained in the informations below#
$.%.% o aid the planning of actual operations
&n G !urniture, budgeting helps them to analyse the problems then the manager can
find the way to develop and solve it. &n general, the costs and the revenue always
change so G !urniture can plan" trac' and control the spending to forces management
to loo' ahead and reach the objectives
$.%.( o communicate plans to various responsibility centre managers
he communication plays an important role of distribution in G !urniture. Preparing a
budgeting to analyse and develop the business can help employees and managers
clearly 'now about their responsibilities in wor'. !urthermore, it also ensure that each
person affected by the plans then they can be supposed to be doing" G !urniture’s
employee can communicate with their managers in correctly and receive the feedbac'
from managers as supporting.
$.%.$ o co)ordinate the activities of the organisation
After leading the responsibilities, objectives bugedting also create the co)ordination
between managers and subordinates or between departments in G !urniture. hese
actions can be made to ensure maximum tintergration of effort towards common goals
*+earning ,edia (-%-.
!or example, the branch of G !urniture will calculate the number of product in the store
then budget to analyse the production re/uirements to ensure the objective achievement
and minise the ris'. hen, the budgeting will be sent to sale centre of G !urniture to
define product needed such as table, wood chair. +oo'ing on the budgeting, the
manager can analyse the customer demand to ta'e the right decisions in producing
goods.
$.%.0 o control activities
he uniform activities are very important in the organisation that helps manager and
employee can control the wor' and easy to solve the problems occur. 1aving a
&ccounting 2 Page 3
budgeting it means they can list exactly the wor' for all department in G !urniture such
as the objective in sale department in ,ay is %--- 2ood tables and chairs. he
manager can control activities relate to budgeting of department to ensure they can
achieve the goals in business.
$.%.3 o evaluate the performance of managers
he managers also relate to the income revenue, the costs or payment after a business
/uarter to analyse the effective of plan or the current budgeting then they can change
and ma'e the decisions to improve and develop the sale for G !urniture. !urthermore,
budgeting can help managers to forecast the ris'" which can occur in their business and
evaluate the situation of the company.
4esides, to control and provide a suitable plan for organisation the manager and G
!urniture must also choose right budget methods to have good result in their business.
$.%.5 &ncremental 4udgeting
Nowadays, &ncremental 4udgeting is /uite common to use in many organisation. his
budgeting method is related to ta'e the figures in last year about inflation, or planned
increases in sales price and costs. he budget is prepared by ta'ing the current period6s
budget or actual performance as a base, with incremental amounts then being added for
the new budget period. herefore in a few particular cases, the manager can have a
common misapprehension about &ncremental budgeting that the big disavantages in this
budget is does not to allow for inflation but sometimes it has.
$.%.7 8ero 4ase 4udgeting
&n this method the manager will identify the activities to analyse the activity expenses,
the purpose, classify different methods to achieve the objectives, establish the
performance measures for the activity and evaluate, asseses the activity at different
levels. After that, the manager also sees and analyse the process in detail base on the
figures calculated by started from 9ero base at period year.
&ccounting 2 Page 4
3.2: SELECT APPROPRIATE BUDGETING METHODS
o having right plans and developing the business and minimise the ris' calculation in
accounting the organisation must choose the right budget methods for manager can
control any activity that has a financial impact. here are ( budgeting methods" which
will be explained in the next paragraphs#
$.(.% &ncremental 4udgeting#
&t is a method to identify the targets in estimates based on the actual operating results of
the previous period and acjested for growth rate and expected inflation rate. hus, this
method is clear, easy to understand and easy to use, built relatively stable, enabling,
sustainable basis for the managerment of the operating units in all activities.
$.(.( 8ero 4ase 4udgeting
8ero base budgeting is a budgeting method that helps manager to prepare estimates of
their expenses for a period time. Nitto :o'aso can use this method to minise the ris's
during the producing in manufacture. he manager or director can see in figures at
activities" which started from a buget base of 9ero to analyse the budget cycle then have
a right view in all expenses and justify them to save and reduce wasting expense to
minimise it. 1owever, if the unit will use this method to assess in detail the cost effective
operation of the unit, ending the imbalance between wor'load and implementation costs,
and help unit selection is the most optimal way to achieve its objectives.
he benefits of this budgeting are organisation can remove inefficient or obsolete
operations because the calculation will be started in the end of the period bugeting.
!urthermore, the manager will clearly analyse budgeting to reduce the costs. 4esides, it
provides a budgeting and planning tool for management to control the money flow which
be prepared and pay for the material and other variable costs. hen, it can increase
motivations for employee to set the target.
&ccounting 2 Page 5
3.3: PREPARE BUDGETS ACCORDING TO THE CHOSEN BUDGETING
METHOD
&n the recent year, the company developed new product line using of latest technology
are AP and ;G. he manager must ensure to prepare the budgets for control and
forecast the activity base on producing goods and minimise the ris' in manufacture to
have best profits.
As the managers 'now, they have to prepare and calculate the budget in sale,
production, direct materials usage, direct material and purchase, direct labor, factory
overhead, selling and Amin, master budget and <ash !low to show the director and
explain how the company can run the process effectively. he budget will be shown in
next information belows#
3.3.1 The Sales Budget of coma!"
he sale budget will be set to forecast the number of product will be sold in the period
time. !or example, Nitto :o'aso often recieve orders from :apan to procduce :o =enso.
he manager must care about number of :o =enso in warehouse and manage them by
calculating the number of goods will be produced each day. he order will be transfered
in 7 > %- days so the director must ensure and have right budget at a right time to supply
it for their customer.
/ase on the case stud95 we can calculate the revenue of each model for the 9ear 20'3:
Sales #e$e!ues % Sales $olume &u!'t( ) Sales #'ces &*+u!'t(
 ,ales revenue 2odel &P : 75500 x 400 : 3,-..,...
 ,ales revenue 2odel ,! : '5300 x 530 : /01,...
We can calculate the total revenues for two models:
Total #e$e!ues % sales #e$e!ue 2odel A3 4 sales #e$e!ue 2odel S5
: 354005000 ; 7835000 : -,601,....
&fter calculating the sale budget is shown b9 the table below:
Deta'ls 2odel &P 2odel ,! "otal
Sales $olume &u!'t( 75500 '5300
Sales #'ces &*+u!'t( <400 <530
Sales #e$e!ue &*( <354005000 <7835000 <452835000
&ccounting 2 Page 3
3.3.6 The 3#oduct'o! Budget
Production budget help a company to forecast how much the product will be produced to
supply the customer and then it relates to other budget such as labor budget, material
budget and expense budget" which impact on the producing goods in Nitto :o'aso. !or
example, the company will produce %--)%3- :o =enso to supply the order from :apan so
the manager must 'now exactly the /uantity of product will be made in the manufacture
to ensure supply enough goods for customer in the right time.
As the manager can see in the calculation, the production budget will be calculated by
Budgeted prdu!t"# "# u#"t$ % Fre!&$t $&'e$ "# u#"t$ ( E#d"#g "#)e#tr*
re+u"red "# u#"t$ , Beg"##"#g "#)e#tr* "# u#"t$
[email protected] 4udgeted production in units ,odel AP ? A,3-- B %,A7- > %7- ? %-.(--
[email protected] 4udgeted production in units ,odel ;G ? %,5-- B C- > A3 ? %,53-
he Production 4udget of Nitto :o'aso#
2odel &P 2odel ,!
Fo#ecast Sales &u!'ts( 75500 '5300
E!d'!g 7!$e!to#" Re8u'#ed &u!'ts( '57=0 80
Beg'!!'!g 7!$e!to#" &u!'ts( '=0 75
Budgeted 3#oduct'o! &u!'ts( '05200 '5305
3.3.3 D'#ect 2ate#'al Usage Budget
2aterial ,: < =(20 #er unit
2aterial ": < '3(00 #er unit
-irect 1abor: < '2(00 #er unit
As Nitto :o'aso manager see tin the table, ,odel AP, ,odel ;G and Direct +abor cost
are calculated by#
,aterial ; ? ,odel AP or ,odel ;G *units. x ,aterial ; cost per unit
,aterial ? ,odel AP or ,odel ;G *units. x ,aterial cost per unit
Direct +abor ? ,odel AP or ,odel ;G *hours. x Direct +abor cost per unit
2odel &P 2odel ,!
2ate#'al S <=2 <5=(3
2ate#'al T <70 <'44
D'#ect La9o# <'20 <'70
&ccounting 2 Page =
2odel &P 2odel ,!
2ate#'al S '0 units 7 units
2ate#'al T 5 units 8 units
D'#ect La9o# '0 hours '5 hours
he manager can set up the direct ,aterial Esage 4udget base on production budget"
which were calculated in the period table that they have %-,(-- units for model AP and
%,5-3 units for model ;G. o calculating the ,aterial Esage 4udget the manager should
combine the direct material usage in two departments.
U#"t$ - d"re!t .&ter"&' u$&ge -r .de' AP "# M&ter"&' S "$#
Enits ? Enits to be produced for model AP x ;tandard material usage for model AP
Enits ? %-,(-- x %- ? 1/20///
U#"t$ - d"re!t .&ter"&' u$&ge -r .de' SG "# M&ter"&' S "$:
Enits ? Enits to be produced for model ;G x ;tandard material usage for model ;G
Enits ? %,5-3 x A ? 120 12/
Tt&' d"re!t .&ter"&' u$&ge -r .de' AP "# M&ter"&' S "$:
otal ? Enits x ;tandard material cost
otal ? %-(,--- x 7.( ? 33202// 4
Tt&' d"re!t .&ter"&' u$&ge -r .de' SG "# M&ter"&' S "$:
otal ? Enits x ;tandard material cost
otal ? %(,A0- x 7.( ? 520221 4
U#"t$ - d"re!t .&ter"&' u$&ge -r .de' AP "# M&ter"&' T "$#
Enits ? Enits to be produced for model AP x ;tandard material usage for model AP
Enits ? %-,(-- x 3 ? 610///
U#"t$ - d"re!t .&ter"&' u$&ge -r .de' SG "# M&ter"&' T "$:
Enits ? Enits to be produced for model ;G x ;tandard material usage for model ;G
Enits ? %,5-3 x C ? 120226
Tt&' d"re!t .&ter"&' u$&ge -r .de' AP "# M&ter"&' T "$:
otal ? Enits x ;tandard material cost
otal ? 3%,--- x %5 ? 1170/// 4
Tt&' d"re!t .&ter"&' u$&ge -r .de' SG "# M&ter"&' T "$:
otal ? Enit x ;tandard material cost
otal ? %0,003 x %5 ? 231012/ 4
Furt8er.re0 t8e Tt&' U#"t$ M&ter"&' S &#d M&ter"&' T "# t9 Mde'$ "$
Tt&' S % 1/20/// ( 12012/ % 112012/
Total T % :1,... 4 1-,--: % 1:,--:
[email protected] Tt&' d"re!t .&ter"&' u$&ge -r .de' AP:
otal ? 7$0,0-- B A%5,--- ? %,33-,0--
&ccounting 2 Page 7
Apply the same method we have otal direct material usage for model ;G#
otal ? C(,00A B ($%,%(- ? $($,35A
[email protected] otal direct material usage for two models is#
otal ? %,33-,0-- B $($,35A ? %,A7$,C5A
2odel A3 2odel S5
Total
U!'ts
Total
U!'t
3#'ce
Total &*(
U!'ts
U!'t
3#'ce Total &*( U!'ts
U!'t
3#'ce
&*(
Total
&*(
2ate#'als
S
1.6,... ;.6 ;3-,-.. 16,/-
.
;.6 06,--/ 11-,/-. ;.6 /61,/-/
2ate#'als
T
:1,... 11 /11,... 1-,--
:
11 631,16. 1:,--: 11 1,.-;,16.
1,::.,-.
.
363,:1/ 1,/;3,01/
3.3.- D'#ect 2ate#'al 3u#chase Budget
/ase on the calculating 2aterial , and 2aterial " before5 we have 2aterial , is ''45740
and 2aterial " is 355445( &##l9ing to the -irect 2aterial Purchase /udget5 the
accountant can calculate in these figures below:
The Budgeted D'#ect 2ate#'al 3u#chase '! u!'ts % D'#ect 2ate#'al Re8u'#eed 9"
3#oduct'o! 4 E!d'!g 7!$e!to#" Re8u'#ed < Beg'!'!g 7!$e!to#"
&##l9 it we have two -irect 2aterial Purchase in two 2aterial are:
2aterial , : ''45740 ; '05200 > 75500 : 111,:-.
2aterial " : 355445 ; '5=00 > 75000 : :0,1-:
:? The Budgeted D'#ect 2ate#'al 3u#chase '! * % The Budgeted D'#ect 2ate#'al
3u#chase ) Cost e# u!'ts
:? -irect 2aterial , Purchase in @ : ''35540 x =(2 : /30,.//
:? -irect 2aterial " Purchase in @ : 585'45 x '3 : 0-1,36.
2aterial , 2aterial "
D'#ect 2ate#'al Re8u'#ed 9" 3#oduct'o! ''45740 355445
E!d'!g 7!$e!to#" Re8u'#ed &u!'ts( '05200 '5=00
Beg'!!'!g 7!$e!to#" &u!'ts( 75500 75000
Budgeted D'#ect 2ate#'al 3u#chase ''35540 585'45
Cost e# u!'ts <=(20 <'3(00
&ccounting 2 Page 8
Budgeted D'#ect 2ate#'al 3u#chase '! * <7385077 <8435320
Total 3u#chase <'5=755407
Cost of raw material consumed : 7385077 ; 8435320 : 1,;/:,-./
3.3.: D'#ect La9o# Budget
he labor cost plays an important role in producing in any manufacture even Nitto
:o'aso. &f they want to produce products for the orders the first thing manager must care
is labor cost. he total labor cost will be calculated by ta'ing all people, process in Nitto
:o'aso mutiplying the number of hour they will wor' for producing or completing their
tas's. he director also can define the budget and set the suitale price to get highest
profit. !or Nitto :o'aso, they have (-- > 3-- people wor' in company, the director must
'now how much the labor cost per month to forecast the suitable number of :o =enso
producing. he fomula to calculate the total wage for two department is#
Tt&' 9&ge % Tt&' 8ur$ : '&;r !$t
&n the case study the ,odel AP ? %-,(-- units and ,odel ;G ? %,5-3 units
 Tt&' 8ur$ t prdu!e u#"t$ - .de':
 Tt&' 8ur$ % D"re!t '&;r 8ur$ -r e&!8 prdu!t : U#"t$ t ;e prdu!ed
 otal hours model AP ? %- x %-,(-- ? 1/20///
 otal hours model ;G ? %3 x %,5-3 ? 220/36
Tt&' 9&ge % Tt&' 8ur$ : '&;r !$t
 otal wage ,odel AP ? %-(,--- x %( ? 102220///
 otal wage ,odel ;G ? (0,-73 x %( ? 21105//
Total D'#ect La9o# =ou#s % 1.6,... 4 6-,.;: % 161,.;:
%> Budgeted D'#ect La#9o# Cost % 1,66-,... 4 6//,0.. % 1,:16,0..
2odel &P 2odel ,!
Budgeted 3#oduct'o! &u!'ts( '05200 '5305
D'#ect La9o# =ou#s e# u!'ts '0 '5
Budgeted D'#ect La9o# =ou#s '02000 240=5
Total D'#ect La9o# =ou#s '230=5
Cost of D'#ect La9o# <'2
Budgeted D'#ect La9o# Cost <'55'25800
3.3.1 Facto#" O$e#head Budget
&ccording from 1abour /udget5 Total hou#s of model A3 a#e 1.6,... hou#s and Total
hou#s of model S5 a#e 6-,.;: hou#s.
&ccounting 2 Page '0
7!d'#ect 2ate#'al % Budgeted $a#'a9le o$e#head #ate ) Total hou#s dea#tme!t
%> 0ndirect 2aterial -e#arment ' : '(20 x '025000 : 166,-..
:? 0ndirect 2aterial -e#atment 2 : 0(7 x 2450=5 : 10,61.
As the same calculat'o! ?e also ha$e the 7!d'#ect La9o# % Budgeted $a#'a9le
o$e#head #ate ) total hou#s dea#me!t
:? 0ndirect labor 2aterial -e#artment ' : '(2 x '025000 : 166,-..
:? 0ndirect labor 2aterial -e#artment 2 : '(2 x 2450=5 : 6/,/0.
3o?e# % Budgeted $a#'a9le o$e#head #ate ) total hou#s
:? Power -e#artment ' : 0(3 x '025000 : 6.,-..
:? Power -e#artment 2 : 0(4 x 2450=5 : 0,13.
2a'!te!a!ce % Budgeted $a#'a9le o$e#head ) total hou#s
:? 2aintenance -e#artment ' : 0(2 x '025000 : 6.,-..
:? 2aintenance -e#artment 2 : 0(4 x 2450=5 : 0,13.
:? "otal controllable overhead -e#artment ' : '225400 ; '225400 ; 3'(200 ; 205400 :
361,-..
:? "otal controllable overhead -e#artment 2 : '85230 ; 275780 ; 85330 ; 85330 :
1;,-1.
%> "otal controllable overhead in two -e#artments : 3235400 ; 3=54'0 : 303,/1.
4ariable overhead rates +verheads "otal
-e#artment
'
-e#artment
2
-e#artment
'
-e#artment
2
Controllable overhead
0ndirect materials '(20 0(70 '225400 '85230
0ndirect labor '(20 '(20 '225400 275780
Power Avariable #ortionB 0(30 0(40 3'5200 85330
2aintenance Avariable #ortionB 0(20 0(40 205400 85330
"otal controllable overhead 3235400 3=54'0 38357'0
NonCcontrollable overhead
-e#reciation '005000 705000
,u#ervision '005000 405000
Power Afixed #ortionB 405000 25000
2aintenance Afixed #ortionB 455300 35'83
"otal nonCcontrollable overhead 2755300 '255'83 4'05=83
"otal overhead 3'25000 '825303 7045303
3.3.; Sell'!g @ Adm'! BudgetA
&ccounting 2 Page ''
Dea#tme!t 1A
"he formula which is used to calculate the cost in direct material is:
D'#ect mate#'al : U!'t to 9e #oduced of model A3 x Sta!da#d 2ate#'al cost of
model A3 x standard cost of material
"hus5 D'#ect mate#'al fo# 2ate#'al S a!d 2ate#'al TA
2aterial ,: '05200 x '0 x =(2 : ;3-,-..
2aterial ": '05200 x 5 x '3 : /11,...
"hen5 we can calculate the d'#ect la9ou# cost which is multi#lied b9 u!'t to 9e
#oduced, d'#ect la9ou# hou#s usage fo# each #oduct, a!d sta!da#d la9ou# costs(
D'#ect la9o# % '05200 x '0 x '2 : 1,66-,...
Co!t#olla9le costA
0ndirect material: '05200 x '0 x '(2 : '225400
0ndirect labor: '05200 x '0 x '(2 : '225400
Power Avariable #ortionB : '05200 x '0 x 0(3 : 3'5200
2aintenance Avariable #ortionB : '05200 x '0 x 0(2 : 205400
Total co!t#olla9le cost : '225400 ; '225400 ; 3'5200 ; 205400 : 361,-..
Dea#tme!t 6A
"he formula which is used to calculate the cost in direct material is:
D'#ect mate#'al : U!'t to 9e #oduced of model S5 x Sta!da#d 2ate#'al cost of
model S5 x standard cost of material
"hus5 D'#ect mate#'al fo# 2ate#'al S a!d 2ate#'al TA
D'#ect mate#'alA
2aterial ,: '5305 x 7 x =(2 : 825447
2aterial ": '5305 x 8 x '3 : 23'5'20
"hen5 we can calculate the d'#ect la9ou# cost which is multi#lied b9 u!'t to 9e
#oduced, d'#ect la9ou# hou#s usage fo# each #oduct, a!d sta!da#d la9ou# costs(
D'#ect la9o# % '5305 x '5 x '2 : 2775400
Co!t#olla9le costA
&ccounting 2 Page '2
0ndirect material : '5305 x '5 x 0(7 : '85230
0ndirect labor : '5305 x '5 x '(2 : 275780
Power Avariable #ortionB : '5305 x '5 x 0(4 : 85330
2aintenance Avariable #ortionB : '5305 x '5 x 0(4 : 85330
Total co!t#olla9le cost : '85230 ; 275780 ; 85330 ; 85330 : 1;,-1.
.urthermore5 the nonCcontrollable cost also needs to be included to have total overhead
costs because total overhead costDs formula is: Co!t#olla9le costs ; No!Bco!t#olla9le
costs
&s the result5 nonCcontrollable costs of two de#artments are tabulated as two tables
below:
Department 1:
-e#reciation '005000
,u#ervision '005000
Power Afixed #ortionB 405000
2aintenance Afixed
#ortionB
455300 2755300
Department 2:
-e#reciation 705000
,u#ervision 405000
Power Afixed #ortionB 25000
2aintenance Afixed
#ortionB
35'83 '255'83
:? Total o$e#head cost fo# 9oth dea#tme!tsA 3'25000; '825303: /.-,1.1
3.3./ 2aste# Budget
Less '!$e!to#" stocC of #a? mate#'als % E!d'!g '!$e!to#" #e8u'#ed ) Sta!da#d cost
:? 1ess inventor9 stocE of raw materials , : '05200 x =(2 : ;3,-..
&ccounting 2 Page '3
:? 1ess inventor9 stocE of raw materials " : '5=00 x '3 : 6;,6..
%> Total of Less '!$e!to#" stocC of t?o #a? mate#'als % ;3,-.. 4 6;,6.. % 1..,1-.
Dalue of #oduct'o! mate#'als % 1/0,6.. 4 1,;/:,-.1 4 1..,1-. % 1,/;3,01/
/ase on the -irect labour budget5 .actor9 overhead budget5 the total costs of direct
labour and factor9 overhead are E 1,:16,0.. fo# d'#ect la9ou# total costs and E /.-,1.1
fo# facto#" o$e#head total costs.
"hus5 the total #roduction cost of !" .urniture includes -irect 1abour costs5 .actor9
+verhead5 and Production 2aterial costs(
Total #oduct'o! cost : 4alue of #roduction materials ; -irect labor > .actor9
overhead : '57=35837 ; '55'25800 ; 7045303 : E -,101,-;-
.inall95 the formula of cost of sales is:
Total 3#oduct'o! ; Oe!'!g f'!'shed good < Less clos'!g f'!'shed goods
"hus5 Cost of ,ales : 45'8'54=4 ; 8850=3 > 3355874 : E 3,16-,:11
A3 S5
U!'ts U!'t #'ce Cost U!'ts U!'t #'ce Cost Total
D'#ect 2ate#'al
S '0 =52 =2 7 =52 5=53
T 5 '3 70 8 '3 '44
D'#ect la9o# '0 '2 '20 '5 '2 '70
Facto#"
O$e#head

Dea#tme!t 1 '0 3 30
Dea#tme!t 6 '5 7500 '20500
U!'t #'ce 336 50'530
Clos'!g
7!$e!to#"
'7=0 80
16../-
.
-:.1-- 11:.0/
-
3.3.0 Budgeted Bala!ce Sheet
he tt&' )&'ue - depre!"&t"# - t9 dep&rt.e#t$ is# %--,--- B A-,--- ? 4 11/0///
hus, t8e )&'ue - depre!"&t"# -r t8e #e:t *e&r of G !urniture is#
Depreciation of previous year B Depreciation of the next year ? %A-,--- B (33,--- ? 4
2360///
he total cash of !'$"#g ;&'&#!e is#
&ccounting 2 Page '4
<ash of closing balance ? otal of inflow > ,aterials > 2ages > Fther costs and
expanses
<ash of closing balance ? %,0-5,CA0 > 307,CA0 > 505,%AA > %$,50(
<ash of closing balance ? 4 155013/
he total of current assets of G !urniture for the next year is#
<urrent assets ? Gaw material stoc's B !inished goods B Debtors B <ash
<urrent assets ? %--,50- B 553,CA0 B (A-,--- B %CC,%7- ? 102260352
Tt&' E+u"t* - GT Fur#"ture:
otal H/uity ? otal ordinary shares B Geserves B Profit and loss account
otal H/uity ? %,(--,--- B $5C,075 B $C3,0$0 ? 4 10572051/
F')ed AssetsA
1and <'=05000
/uilding F )Gui#ment
<'5282500
0
1ess -e#reciation <4355000 <75=5000
<'502=5000
Cu##e!t AssetsA
aw 2aterials 0nventor9 <'005340

.inished !oods
0nventor9 <2775800
-ebtors <2705000
Cash <'885'=0
<=3750=0
Cu##e!t L'a9'l't'esA
Creditor <30=5774 <4305'73
Re#ese!ted 9" Sha#eholde#s 7!te#estA <'547=5'73
'200000 ordinar9 shares
<'5200500
0
eserves <33854=3
Profit and loss account <3855434 <'583458'0
3.2: 5le!t#ua! Fu#!'tu#e Ltd CASH BUDGET FOR 2/12
A <ash 4udget is an estimate of the company’s cash position for a particular period of
time" which estimated the future cash receipts and payment. he manager and see the
forecast cash balance of a business through tabulation. &n Nitto :o'aso company, they
&ccounting 2 Page '5
also apply the cash budget in their business in monthly to calculate and prepare cash
receipts and payment, ma'e sure they have enough cash to run any activity and to
minimise the ris' if they have any problem during producing goods for customer.
Fua#te# 1
"hus5 we have the Oe!'!g Bala!ce of Cash is 3-,...( "hen5 the #ece't f#om
custome#s is 1,...,...( Total of '!flo? is 345000 ; '50005000 : 1,.3-,...( %owever5
there are some a"me!ts that !" .urniture has to #a9:
2ate#'alsA -..,... WagesA -..,... Othe# costs a!d e)e!sesA 16.,...
&s the result5 the total cash of clos'!g 9ala!ce is:
Cash of closing balance : "otal of inflow > 2aterials > Wages > +ther costs and
ex#anses
Cash of closing balance : '50345000 > 4005000 > 4005000 > '205000
Cash of closing balance : E 11-,...
Fua#te# 6
/ecause of cash of #e$'ous 8ua#te#Gs Clos'!g Bala!ce is also cash of !e)t 8ua#te#Gs
Oe!'!g Bala!ce, the +#ening /alance for Huarter 2 is 11-,.... "hen5 the #ece't
f#om custome#s is 1,6..,...( Total of '!flo? is ''45000 ; '52005000 : 1,31-,...(
%owever5 there are some a"me!ts that !" .urniture has to #a9:
2ate#'alsA -/.,... WagesA --.,... Othe# costs a!d e)e!sesA 1..,...
&s the result5 the total cash of clos'!g 9ala!ce is:
Cash of closing balance : "otal of inflow > 2aterials > Wages > +ther costs and
ex#anses
Cash of closing balance : '53'45000 > 4705000 > 4405000 > '005000
Cash of closing balance : E 60-,...
Fua#te# 3
&s the same formula, the +#ening /alance for Huarter 2 is 60-,.... "hen5 the #ece't
f#om custome#s is 1,16.,...( Total of '!flo? is 2845000 ; '5'205000 : 1,-1-,...(
%owever5 there are some a"me!ts that !" .urniture has to #a9:
&ccounting 2 Page '3
2ate#'alsA --.,... WagesA -/.,... Othe# costs a!d e)e!sesA ;6,.11
&s the result5 the total cash of clos'!g 9ala!ce is:
Cash of closing balance : "otal of inflow > 2aterials > Wages > +ther costs and
ex#anses
Cash of closing balance : '54'45000 > 4405000 > 4705000 > =250'3
Cash of closing balance : E -61,0/-
Fua#te# -
&s the same formula, the +#ening /alance for Huarter 2 is -61,0/-. "hen5 the #ece't
f#om custome#s is 0/:,...( Total of '!flo? is 42'5874 ; 8755000 : 1,-.1,0/-(
%owever5 there are some a"me!ts that !" .urniture has to #a9:
2ate#'alsA :-;,0/- WagesA 1-1,1// Othe# costs a!d e)e!sesA 13,1-6
&s the result5 the total cash of clos'!g 9ala!ce is:
Cash of closing balance : "otal of inflow > 2aterials > Wages > +ther costs and
ex#anses
Cash of closing balance : '54035874 > 54=5874 > 3435'77 > '35342
Cash of closing balance : E 100,1;.
Huarter ' Huarter 2 Huarter 3 Huarter 4 "otal
Oe!'!g 9ala!ce 345000 ''45000 2845000 42'5874 7335874
Rece'ts f#om custome#s
'5000500
0
'52005000 '5'205000 8755000
453055000
'5034500
0
'53'45000 '54'45000 '54035874
453385000
3a"me!tsA
2ate#'als 4005000 4705000 4405000 54=5874 '573=5874
3a"me!ts fo# ?ages 4005000 4405000 4705000 3435'77 '58335'77
Othe# costs a!d e)e!ses '205000 '005000 =250'3 '35342 3055357
8205000 '50205000 88250'3 '520=57'4 45'385730
Clos'!g Bala!ce ''45000 2845000 42'5874 '885'=0 '50285'54
Closing balance each Guarter : +#ening balance > Pa9ment( "he current closing balance
will be the next o#ening balance for next Guarter(
o Developing the company more effective Glentruan !urniture can also apply the
Hxpense and <apital 4udget in their business.
&ccounting 2 Page '=
hese are two budgets" which Nitto :o'aso should prepare during the business. As we
have been already 'nown they often have the meeting with our supplier, customer,
upgrading or fixing the facilities and the bills. &t is also relate to expense and budgeting
so the manager must 'now about it. !or Nitto :o'aso the meeting cost does not more
than %3I total cost to ensure they have the profit for developing business. <apital
4udget is planned for controling the total cost in Nitto :o'aso, it helps manager and
director fix the price, cost for any activity and ta'e the right decisions to achieve the
objectives or have good result in monthly and yearly.
2.1: CACULATE <ARIANCES0 IDENTIF= POSSIBILE CASUE AND
RECOMMEND CORRECTI<E ACTION
"his is the calculation variance of com#an9 to identif9 the #ossible causes then manager
can maEe the solution for budget(
-.1.1 D'#ect 2ate#'al Da#'a!cesA
2ate#'al 3#'ce Da#'a!cesA &S3 < A3( ) AF
& : A<'0 C <''BI'85000Jg : C'85000 A&dverseB
/ : A<'5 C <'4BI'05'00Jg : '05'00 A.avorableB
:? "otal 2aterial Price 4ariances : AC'85000B ; '05'00 : C75800A&dverseB
2ate#'al Usage Da#'a!cesA &SF < AF( ) S3
"he standard Guantit9 of each material
& : 2I85000 : '75000Jg
/ : 'I85000 : 85000Jg
& : A'75000 > '85000BI<'0 : C'05000 A&dverseB
/ : A85000 > '05'00BI<'5 : C'35500 A&dverseB
:? "otal 2aterial *sage 4ariances : AC'05000B ; AC'35500B : C235500A&dverseB
-.1.6 D'#ect La9o# Da#'a!cesA
1abor ate 4ariances : A<8 C <8(30BI275500 : C'=5'00 A&dverseB
1abor )fficienc9 4ariances : A2=5000 > 275500BI<8 : C'35500 A&dverseB
-.1.3 O$e#heads Da#'a!cesA
4ariable +verheads : A&% x ,B > &ctual Cost :275500 x <2 > 525000 : 5000
A.avorableB
,tandard %our : 85000 x 3 : 2=5000
&ccounting 2 Page '7
+verheads )fficienc9 4ariances : A,% > &%B x , : <2IA2=5000 C275500B : C3000
A&dverseB
Total Da#'a!cesA
2ate#'al A 28000 &
2ate#'al B 3400 &
La9o# 30300 &
Da#'a9le O$e#head 2000 .
-.1.- Sale Da#'a!ceA
,ales margin #rice : A&P > /PB x &H : A<80 C <77B x 85000 : <'75000 A.avorableB
,ales margin volume : A&H > /HB x ,2 : A85000 C'05000B x <20 : <205000 A&dverseB
"otal ,ales : ,ales margin #rice ; ,ales margin volume : <25000 A&dverseB
-.6 Reco!c'l'at'o! of Budgeted a!d Actual 3#of'tA
$ $ $ $
4udgeted net profit

A- ---
;ales variances



;ales margin
price

%A --- !

;ales margin
volume

(- --- A ( --- A
Direct cost variance


,aterial Price# ,aterial A

%C --- A
,aterial 4

%- %-- ! A C-- A
Esage# ,aterial A

%- --- A
,aterial 4

%5 3-- A(5 3-- A$3 0-- A
+abour Gate

%7 %-- A
Hfficiency

%$ 3-- A$- 5-- A
,anufacturing in
overhead variances


&ccounting 2 Page '8
!ixed Fverhead
expenditure

0 --- !
Jariable Fverhead
expenditure

3 --- !
Jariable Fverhead
efficiency

$ --- A 5--- ! 5( --- A
Actual profit

%A ---
&s the manager can see in the table5 the econciliation of budget and actual #rofit can
show how business run and the im#act of &ctual Price ACostB and ,tandard Price ACostB
to com#an9 actual #rofit( &ccording to the table5 manager can see about ,ales variances5
-irect cost variance5 1abour variances and the +verhead variances(
4(2(' ,ales 4ariances
manager calculate ,ales 4ariances : ,ales margin #rice ; ,ales margin volume
: '75000 ; AC205000B : B6,... &Ad$e#se(
4(2(2 -irect Cost 4ariances
-irect Cost 4ariances : "otal 2aterial Price ; "otal 2aterial *sage
: AC75800B ; AC235500B : C3:,-..&Ad$e#se(
4(2(3 -irect 1abor 4ariances
-irect 1abor 4ariances : 1abor ate 4ariances ; 1abor )fficienc9 4ariances
: AC'=5'00B ; AC'35500B : B3.,1..&Ad$e#se(
4(2(4 2anufacturing in +verhead 4ariances
2anufacturing in +verhead 4ariances : .ixed +verhead ex#enditure ; 4ariable
+verhead ex#enditure ; 4ariable +verhead efficienc9
: 45000 ; 5000 ; AC35000B : 1,... &Fa$o#a9le(
"he /udget net #rofit given is 705000 then manager can calculate the total &ctual Profit
b9 /udget net #rofit ; ,ales 4ariances ; -irect Cost 4ariances ; -irect 1abor 4ariances
; 2anufacturing in +verhead 4ariances
: 705000 ; AC25000B ; AC355400B ; AC305300B ; 35000 : 1/,...
0t can be easil9 to see that the com#an9 must im#rove their business and tr9 to save the
cost because there are man9 adverse costs for the organisation( 0t relates and influences
the actual #rofit as we can see( "o im#rove it the manager can reference the informations
below:
&ccounting 2 Page 20
,ales 4ariances: the manager must forecast the number of #rodcut can be sold in actualK
which relate to ,ales margin volume( 0f the Guantit9 of #roduct sold more units that
ex#ected the9 will be recieved more sales volume variance( 0n this case5 the Guantit9 is
lower than the customer demand(
-irect Cost 4ariances: 0t includes the 2aterial Price and 2aterial *sage in 4ariances(
"he manager can have other relationshi#s with su##liers to have good #rice for their
material( .urthermore5 the usage must be calculated and forecasted to ensure the #roduct
will be #roduced enough to su##l9 the customer orders( 0f not5 the organisation will
losses their business and #rofit(
-irect 1abor 4arinaces: "he labor rate and labor efficienc9 are ver9 im#ortant to #roduce
the #roduct( 0f the manager cannot forecast the labor rate5 the9 will not have enouch labor
resources to #roduce goods and loss the labor efficienc9( .or this case5 the manager must
calculate and forecast the number of em#lo9ee5 their worE #erformance to im#rove the
labor #erfomance in organisation(
-.3 RECO22ENDAT7ON FOR BU7SNESS RELAT7ONS=73
"o: /oard of 2anager
.rom: 2anagement &ccountant
&ccounting 2 Page 2'
-ate: 5 &#ril 20'4
,ubLect: e#ort for re#onsibilit9 center of Nitto MoEaso 1td
E)ecut'$e summa#"A
"he re#ort is the result from the research through all res#onsibilit9 center of com#an9( 0t
will highlight all information to hel# manager get the overview
2ethod of #esea#chA
"his re#ort has been com#leted from finding a various res#onsibilit9 center include cost
center5 revenue center and #rofit center(
Cost Ce!te#A "his center is about com#an9 costK which the manager can relate to taEe
the decisions about the cost( .urthermore the9 also have overall the costs to minimise and
control them(
Re$e!ue Ce!te#A "his is ver9 im#ortant to relate the final #rofit center( /asing on the
revuenue center5 manager will clearl9 Enow how to develo# and im#rove their business(
3#of't Ce!te#A 0s the overall view for manager taEing the decisions and #lans to
maximise the #rofit for com#an9(
Recomme!dat'o!
"he res#onsibilit9 centers are identifiable segment within com#an9 for each individual( 0t
include revenue center5 cost center5 #rofit center and investment center
"his re#ort research finding designed to the res#onsibilit9 center of Nitto MoEaso 1td(
2./: REFERENCES
&ccaglobal A20'0B Com#aring budgeting techiGues N+nlineO available from:
&ccounting 2 Page 22
Phtt#:$$www(accaglobal(com$gb$en$student$accaCGualCstudentCLourne9$GualC
resource$accaCGualification$f5$technicalCarticles$com#aringCbudgetingC
techniGues(html?
/usinessdictionar9 A20'2B ,ales volume variance N+nlineO available from:
Phtt#:$$www(businessdictionar9(com$definition$salesCvolumeCvariance(html?
-ummies A20'2B Choosing a budget method N+nlineO available from:
Phtt#:$$www(dummies(com$howCto$content$choosingCaCbudgetCmethod(html?
Jetoanthue A20'0B .inance management for organisation N+nlineO available from:
Khttp#LLwww.'etoanthue.vnLindex.phpLcac)tin)'iem)toan)da)dangL%77C)/uan)ly)
tai)chinh)don)vi)su)nghiep)va)nhung)van)de)dat)ra)hien)[email protected]
,hellClivewire A20'4B &ccounts and finance budgeting5 t9#e of budgeting N+nlineO
available from:
Phtt#:$$www(shellClivewire(org$home$businessClibrar9$accountsCandC
finance$budgeting$t9#esCofCbudgeting$?
&ccounting 2 Page 23

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