Final Accounting

Topics: Costs, Budget, Cost Pages: 12 (1555 words) Published: May 20, 2015


Peyton Approved Accounting Final

Final Part 1
SALES BUDGET
The sales budget is prepared by multiplying the expected unit sales volume for each product by its anticipated unit-selling price. As reflected in Exhibit A noted below and included in the overall Peyton Approved budget worksheet included in Appendix A, Peyton Approved expects sales volume to be 18000, 22000 and 20000 units in the month of July, August and September respectively. The budgeted sales in August exceeded July's sales units by 4000 units, however, sales declined in September by 2000 units from August. Peyten Approved budgeted sales price per units for the quarter was based on a sales price of $18 per unit. Thus, budgeted total dollars per month are 324,000 computed 18 sales price per unit, 396000 sales price per unit, and 360000 sales price per unit in July, August, and September respectively. Exhibit A – Sales Budget

PRODUCTION BUDGET
Production budget shows the units to produce to meet anticipated sales. The formula to compute required production unit is as below: Budgeted sales units + Budgeted Ending - Beginning inventory = Required production units. As reflected in the Production Budget captured in Exhibit B below and included in the overall Peyton Approved budget worksheet included in Appendix A. First budgeted sales units for each month in the quarter was used to multiply with ratio to inventory future sales to compute budgeted ending inventory. The company stated that it was company's policy to have a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. Then, budgeted sales units of 18,000, 22,000 and 20,000 units are added to the budgeted ending inventory units of 15,400, 14,000 and 16,800 units for the month of July, August and September, respectively to arrive to required units to be produced of 33,400, 36,000 and 36,800 units for each respective months. Subsequently, beginning inventory is deducted from required units to be produced to arrive to units to be produced. Beginning inventory for July was obtained from the ending inventory of June is a permanent account and it rolls over to the next month. Hence the ending inventory of prior month will be the beginning inventory of the subsequent month. A realistic estimate of ending inventory is essential in scheduling production requirements. Excessive inventories in one quarter may lead to cutbacks in production and employee layoffs in a subsequent quarter. On the other hand, inadequate inventories may result either in-added costs for overtime work or in lost sales. Exhibit B – Production Budget

MANUFACTURING BUDGET
The manufacturing overhead budget included in Exhibit C below, and included in the overall Peyton Approved budget worksheet included in Appendix A, shows the expected manufacturing overhead costs for the budget period. This budget distinguishes between variable and fixed overhead costs. Peyton Approved expects variable costs to fluctuate with production volume. The budgeted variable overhead for Peyton Approved for July is 22,410, August is 27,810 and September is $37,780. Peyton Approved 's overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $1.35 per direct labor hour. Fixed cost: Peyton Approved considers depreciation of $20,000 per month is to be treated as fixed factory overhead. VOH and FOH amounts are added to arrive to the Budgeted total overhead.

Exhibit C – Manufacturing Budget

SELLING EXPENSE BUDGET
With reference to the Selling Expense Budget in Exhibit D below and included in the overall Peyton Approved budget worksheet included in Appendix A; Peyton Approved does not combine its general and administrative expenses into one budget, the selling and administrative expense budget. This budget projects anticipated selling expenses for the budget period and it is comprised of sales commission and sales salaries....
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