June 11, 2022/ Steven Bragg
The budgeted income statement contains all of the line items found in a normal income
statement, except that it is a projection of what the income statement will look like during future budget periods. It is compiled from a number of other budgets, the accuracy of which may vary based on the realism of the inputs to the budget model. These other budgets include a revenue budget, a cost of goods sold budget,
and budgets covering all selling and administrative activities. The budgeted income statement is extremely useful for testing whether the projected financial results of a company appear to be reasonable. When used in combination with the budgeted balance sheet, it also
reveals scenarios that are not financially supportable (such as requiring large amounts of debt), which management can remedy by altering the underlying budget assumptions. The following is an example of a budgeted income statement: Very Large Corporation
* F/G = Finished goods Other Budgeted Income Statement IssuesThe budgeted income statement works best when presented for all of the budget periods at once, so that you can compare the results for the various periods and spot anomalies that may require additional investigation. For analysis purposes, the number of line items in a budgeted income statement may be compressed or contracted in comparison to the line items normally used for an actual income statement. Ideally, the line items should be similar, since the budgeted results are typically loaded into the accounting software for each actual income statement line item and then used in budget-versus-actual reports. LO 4Describe the sources for preparing the budgeted income statement.Illustration 9-12Budgeted Income StatementBudgeted Income StatementSecond, determine Cost of Goods Sold by multiplying units soldtimes unit cost:15,000 units x $44 =$660,000 9-46Illustration:All data for the income statement come from theindividual operating budgets except the following: (1) interestexpense is expected to be $100, and (2) income taxes areestimated to be $12,000.LO 4Illustration 9-13Preparing the Operating BudgetsPreparing the Operating Budgets Each of the following budgets is used in preparing thebudgeted income statementexceptthe:Review QuestionPreparing the Operating BudgetsPreparing the Operating Budgets Get answer to your question and much more 9-47LO 4Describe the sources for preparing the budgeted income statement. 9-48Soriano Company is preparing its budgeted income statementfor 2014. Relevant data pertaining to its sales, production, anddirect materials budgets can be found on the following slide.Soriano budgets 0.5 hours of direct labor per unit, labor costsat $15 per hour, and manufacturing overhead at $25 per directlabor hour. Its budgeted selling and administrative expensesfor 2011 are $12,000,000.(a)Calculate the budgeted total unitcost.(b)Prepare the budgeted income statement for 2011.LO 4Describe the sources for preparing the budgeted income statement. 9-49Soriano Company is preparing its master budget for 2014. Relevant datapertaining to its sales, production, and direct materials budgets are asfollows:Sales:Sales for the year are expected to total 1,200,000 units. Quarterlysales are 20%, 25%, 30%, and 25% respectively. The sales price isexpected to be $50 per unit for the first three quarters and $55 per unitbeginning in the fourth quarter. Sales in the first quarter of 2015 areexpected to be 10% higher than the budgeted sales for the first quarter of2014.Production:Management desires to maintain ending finished goodsinventories at 25% of next quarter’s budgeted sales volume.Direct materials:Each unit requires 3 pounds of raw materials at a costof $5 per pound. Management desires to maintain raw materialsinventories at 5% of the next quarter’s production requirements. Assumethe production requirements for the first quarter of 2015 are 810,000pounds.LO 4 9-50Calculate the budgeted total unit cost and prepare thebudgeted income statement for 2014.LO 4 9-51Shows anticipated cash flows.Often considered to be the most important output inpreparing financial budgets.Contains three sections:►Cash Receipts►Cash Disbursements►FinancingShows beginning and ending cash balances.Cash BudgetLO 5Explain the principal sections of a cash budget.Preparing the Financial BudgetsPreparing the Financial Budgets 9-52Cash Budget -Basic FormatLO 5Explain the principal sections of a cash budget. Upload your study docs or become a Course Hero member to access this document Upload your study docs or become a Course Hero member to access this document What is used to prepare the budgeted income statement?To prepare a budgeted income statement, you'll need to track company revenue, expenses, and net income. You'll then need to set realistic revenue goals and then create an estimate of different revenue items. This means having to include items such as investment gains, interest income, and vendor refunds.
Which of the following is not a financial budget?The answer is b.
Sales budgets and direct labor budgets are operating budgets, not financial budgets. The marginal expenditure budget is not one of the master budgets.
Which one of the following budgets is considered to be the most important financial budget?Which one of the following budgets is considered to be the most important financial budget? Cash budget.
Which of the following budgets would be part of the financial budget of a merchandising company?The financial budget for a merchandising company includes a capital expenditure budget and a cash budget. Just like the cash budget of a manufacturing company it also includes three parts cash receipts, cash payments, and short-term financing.
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Each of the following budgets is used in preparing the budgeted income statement except the
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