MANAGEMENT ACCOUNTING

Management Accounting For Decision-Making

Cash budgets for Redwoods Limited

Part 1)

Sales Budget

For the Year Ending Sept, 2012

 

Quarter

March

April

May

June

July

August

September

Sales Units (Log)

40000

45000

45000

45000

45000

45000

45000

× Price per Unit( £ )

131

131

131

131

131

131

131

Total Sales Of Log

5240000

5895000

5895000

5895000

5895000

5895000

5895000

 

 

 

 

 

 

 

 

Sales Units (Branch)

25000

25000

25000

25000

28750

28750

28750

× Price per Unit( £ )

208

208

208

208

195.52

195.52

195.52

Total Sales Of Branch

5200000

5200000

5200000

5200000

5621200

5621200

5621200

 

 

 

 

 

 

 

 

Total Credit Sales

10440000

11095000

11095000

11095000

11516200

11516200

11516200

Redwoods Limited

Production Budgets (in units)

For the Year Ending Sept, 2012

 

Quarter

March

April

May

June

July

August

September

Budgeted Sales Units (LOG)

40000

45000

45000

45000

45000

45000

45000

+ Planning Ending Units (15%*45000)

 

5000

5000

5000

5000

5000

5000

- Beginning Units (15%*45000)

 

6750

6750

6750

6750

6750

6750

Planned Production in Units (LOG)

 

43250

43250

43250

43250

43250

43250

 

 

 

 

 

 

 

 

Budgeted Sales Units (BRANCH)

25000

25000

25000

25000

28750

28750

28750

+ Planning Ending Units (15%*45000)

 

4000

4000

4000

4000

4000

4000

- Beginning Units (15%*following month)

 

9000

9000

9000

9000

9000

9000

Planned Production in Units (BRANCH)

 

20000

20000

20000

23750

23750

23750

Redwoods Limited

Raw materials purchases budgets (units)

For the Year Ending Sept, 2012

 

Quarter

March

April

May

June

July

August

September

Production

 

43250

43250

43250

43250

43250

43250

+ Planning Ending Units (B)

 

3750

3750

3750

3750

3750

3750

+ Planning Ending Units (A)

 

1500

1500

1500

1500

1500

1500

- Beginning Units (A)

 

1375

1375

1375

1375

1375

1375

- Beginning Units (B)

 

4325

4325

4325

4325

4325

4325

Planned Production in Units (LOG)

 

42800

42800

42800

42800

42800

42800

 

 

 

 

 

 

 

Production

 

20000

20000

20000

23750

23750

23750

+ Planning Ending Units (B)

 

3750

3750

3750

3750

3750

3750

+ Planning Ending Units (A)

 

1500

1500

1500

1500

1500

1500

- Beginning Units (A)

 

1375

1375

1375

1375

1375

1375

- Beginning Units (B)

 

4325

4325

4325

4325

4325

4325

Planned Production in Units (BRANCH)

 

19550

19550

19550

23300

23300

23300

Redwoods Limited

Direct labour budgets (hours and £)

For the Year Ending Sept, 2012

 

Quarter

March

April

May

June

July

August

September

Planned Production in Units

 

43250

43250

43250

43250

43250

43250

× Direct Labour Hours per Unit (skilled)

 

20.9

20.9

20.9

20.9

20.9

20.9

× Direct Labour Hours per Unit (skilled)

 

10.4

10.4

10.4

10.4

10.4

10.4

Budgeted Direct Labour Hours

 

1353725

1353725

1353725

1353725

1353725

1353725

 

 

 

 

 

 

 

 

Planned Production in Units

 

20000

20000

20000

23750

23750

23750

× Direct Labour Hours per Unit (skilled)

 

25.08

25.08

25.08

25.08

25.08

25.08

× Direct Labour Hours per Unit (skilled)

 

15.6

15.6

15.6

15.6

15.6

15.6

Budgeted Direct Labour Hours

 

813600

813600

813600

966150

966150

966150

Redwoods Limited

Cash Budget

For the Year Ending Sept, 2012

 

Quarter

March

April

May

June

July

August

September

Sales

10440000

11095000

11095000

11095000

11516200

11516200

11516200

Credit Sales Collection 65%

6786000

7211750

7211750

7211750

7485530

7485530

7485530

Credit Sales Collection 32%

 

3340800

3550400

3550400

3550400

3685184

3685184

uncollectable 3%

 

 

313200

332850

332850

332850

345486

Total Collection

17226000

21647550

22170350

22190000

22884980

23019764

23032400

 

 

 

 

 

 

Less: Cash Outflows

 

 

 

 

 

Purchases (Log)

 

2354000

2354000

2354000

2354000

2354000

2354000

Purchases (Branch)

 

2346000

2346000

2346000

2796000

2796000

2796000

Payment (60%)

 

1412400

1412400

1412400

1412400

1412400

1412400

Payment (40%)

 

 

941600

941600

941600

941600

941600

Payment (60%)

 

1407600

1407600

1407600

1677600

1677600

1677600

Payment (40%)

 

 

938400

938400

938400

1118400

1118400

discount (7.5)(A)

 

176550

176550

176550

176550

176550

176550

Salaries and Wages

 

400000

420000

441000

463050

486202.5

510512.625

depreciation of equipment

 

1250000

1250000

1250000

1250000

1250000

1250000

Total Cash Outflow

 

7743450

9643450

9664450

10406500

10609652.5

10633962.63

 

 

 

 

 

 

 

 

Net Cash Flow

 

13904100

12526900

12525550

12478480

12410111.5

12398437.38

Opening Cash Balance

 

 

500,000

13,026,900

25,552,450

38,030,930

50,441,042

Closing Cash Balance

 

500,000

13,026,900

25,552,450

38,030,930

50,441,042

62,839,479

Part 2)

The essence of business is to meet human needs through the selection and production services. The people organizing the production must decide how to spend money on what and how to invest to get maximum return on capital employed and at the same time meet the needs of customers. Each of these decisions is an act of choice between alternatives, or different ways of proceeding. Each selection is accompanied by the cost of options (lost) called the opportunity cost or replacement cost.

Planning activity has gained vital importance today, due to technological development, the changing economy, the rapid growth of enterprises, professional development and availability of relevant information that is currently owned in companies. In this activity, take into account future inflation rates is essential for greater projection of the future, especially considering the liquidity and profitability.

Planning is necessary for several reasons:

To prevent changes in the environment so that anticipating them easier to take preventive action in organizations and thereby integrate the objectives and decisions of the organization.

When proper planning of the organizations, achieve greater effectiveness and efficiency of operations and better management.

Given the different definitions of planning, it pays to choose the next design of actions whose mission is to change the order of how it has been defined. According to this definition, we can plan and design activities in the short and long term. If we think in terms of the time dimension, this classification can also be conceived as tactical or operational planning, and strategic planning.

Planning is receiving assistance from the Management Accounting is basically in the design of actions whose mission is to achieve objectives that are in a given period, basically in relation ...