Week 6_ discussion 1

Manufacturing Overhead Budget is an estimate of expected manufacturing overhead costs for the budget period (Kimmel, Weygandt and Kieso, 2009). This budget distinguishes between variable and fixed overhead cost. A manufacturing budget allows an organization to set budget numbers based off of fixed cost to the company and helps to predict variable cost by utilizing activity-based costing. Creating the cost pools allow the accounting to be more accurate. 

Master Budget is a set of interrelated budgets that constitutes a plan of action for a specific time period (Kimmel, Weygandt and Kieso, 2009). A master budget is made up of two budget classes, operating budgets and financial budgets. Setting up the operating cost allows the organization to first create cost pools for operating the business. Operating Budget, individual budgets that result in a budgeted income statement. These budgets set goals for a company’s sales and production personnel. As stated, before it is set up first. It provides specific numbers that cover running the business and numbers needed to cover cost. Financial Budget, individual budgets that focus primarily on the cash resources needed to fund expected operations and planned capital expenditures. These budgets include capital expenditure budget, the cash budget and the budgeted balance sheet. The financial budget is just that the financial numbers that show the dollars used to provide the company’s budget. Its shows the expected cash that is supposed to be spent. Expenses such as employees, Insurance and other vendors. It also houses expenses associated with running the company.  

 References

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Accounting: Tools for business decision making (6th ed.). Hoboken, NJ: John Wiley & Sons.

Jessica:

I chose to talk about the following four organizational budgets: sales budget, production budget, selling and administrative expense budget, and manufacturing overhead budget. Sales budget is an estimate of sales revenue. This can be a great tool in order to gauge sales, but can have a negative affect if the budget is done incorrectly. This can lead to a shortage of inventory which in turn can skyrocket sales for your competition. Production budget shows how many of a product should be produced in order to meet anticipated sales. It can be determined by by adding budgeted sales and desired ending finished good less the beginning finished goods. Selling and Administrative expense budget projects anticipated selling and administrative expenses for a given period. Manufacturing overhead budget shows expected manufacturing overhead costs for the budget period. This helps with cutting future costs and setting selling prices for a given product.

References:

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Accounting Tools for Business Decision Making (6th ed.). Retrieved from The University of Phoenix eBook Collection database.