After studying Chapter 6, you should be able to: Explain how variable costing differs from absorption costing and compute unit product costs under each method, prepare income statements using both variable and absorption costing, reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ. | Lecture 32: Budgetary planning and customer profitability analysis Shows anticipated cash flows. Often considered to be the most important output in preparing financial budgets. Contains three sections: Cash Receipts Cash Disbursements Financing Shows beginning and ending cash balances. Cash Budget Preparing the Financial Budgets 2 Cash Budget - Basic Format Preparing the Financial Budgets 3 Cash Receipts Section Expected receipts from the principal sources of revenue. Expected interest and dividends receipts, proceeds from planned sales of investments, plant assets, and capital stock. Cash Disbursements Section Expected cash payments for direct materials and labor, taxes, dividends, plant assets, etc. Financing Section Expected borrowings and repayments of borrowed funds plus interest. Cash Budget 4 Must prepare in sequence. Ending cash balance of one period is the beginning cash balance for the next. Data obtained from other budgets and from management. Often prepared for the year on a monthly basis. Contributes to more effective cash management. Shows managers the need for additional financing before actual need arises. Indicates when excess cash will be available. Cash Budget Preparing the Financial Budgets 5 Illustration – Hayes Company Assumptions The January 1, 2014, cash balance is expected to be $38,000. Hayes wishes to maintain a balance of at least $15,000. Sales (Illustration 9-3): 60% are collected in the quarter sold and 40% are collected in the following quarter. Accounts receivable of $60,000 at December 31, 2013, are expected to be collected in full in the first quarter of 2014. Short-term investments are expected to be sold for $2,000 cash in the first quarter. Continued Cash Budget 6 Illustration – Hayes Company Assumptions Direct materials (Illustration 9-7): 50% are paid in the quarter purchased and 50% are paid in the following quarter. Accounts payable of $10,600 at December 31, 2013, are expected to be paid in full in the first quarter of . | Lecture 32: Budgetary planning and customer profitability analysis Shows anticipated cash flows. Often considered to be the most important output in preparing financial budgets. Contains three sections: Cash Receipts Cash Disbursements Financing Shows beginning and ending cash balances. Cash Budget Preparing the Financial Budgets 2 Cash Budget - Basic Format Preparing the Financial Budgets 3 Cash Receipts Section Expected receipts from the principal sources of revenue. Expected interest and dividends receipts, proceeds from planned sales of investments, plant assets, and capital stock. Cash Disbursements Section Expected cash payments for direct materials and labor, taxes, dividends, plant assets, etc. Financing Section Expected borrowings and repayments of borrowed funds plus interest. Cash Budget 4 Must prepare in sequence. Ending cash balance of one period is the beginning cash balance for the next. Data obtained from other budgets and from management. Often prepared for the year .
