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Horngren'S Financial And Managerial Accounting
Found in: Page 1228

Short Answer

Question: One benefit of budgeting is coordination and communication. Explain what this means.

Answer

The budget encourages managers to communicate to ensure that the company can achieve its goals.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Budgeting

Budget or budgeting can be defined as it is a plan established by a company for a specified period of time in the future. It helps the entity to focus on the set goals. It guides the entity for performing better.

Planning, coordination and communication, and benchmarking are the main benefits of budgeting.

Step 2: Co-ordination and communication as a benefit of budgeting

Budgeting requires input from all managers from different departments and areas, and these managers work together to make a single, unified, comprehensive plan for the business. Budgeting helps managers communicate with each other by giving suggestions and viewpoints regarding budgeting decisions.

Most popular questions for Business-studies Textbooks

Question: Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash budget

Puckett Company has provided the following budget information for the first quarter of 2018:

Total sales $ 216,000

Budgeted purchases of direct materials 40,600

Budgeted direct labor cost 36,800 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,025

Depreciation 1,000

Insurance and property taxes 6,650

Budgeted selling and administrative expenses:

Salaries expense 14,000

Rent expense 2,500

Insurance expense 2,000

Depreciation expense 350

Supplies expense 4,320

Additional data related to the first quarter of 2018 for Puckett Company:

a. Capital expenditures include $41,000 for new manufacturing equipment to be purchased and paid in the first quarter.

b. Cash receipts are 75% of sales in the quarter of the sale and 25% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at $49,000 and is paid in the quarter incurred.

f. Puckett Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is $25,000, in Accounts Receivable is $21,600, and in Accounts Payable is $16,500.

Requirements

1. Prepare Puckett Company’s schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Puckett Company’s cash budget for the first quarter of 2018.

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