Page 35 - Managerial Accounting-MGT 145

Module 6: Budgeting

Business managers create budgets to plan for future
operations, create benchmarks to measure progress, and
maintain necessary accounting controls. The budget process

involves coordination among every department that is part of the
company. Once the master budget is complete, the company can
measure how actual performance compares with the budget.

Budgeting is the common accounting tool companies use for
planning and controlling. Budgets serve as the financial/monetary
expression of management’s plan for the upcoming period.

The sales budget is important because sales projections drive
the other budgets up, down or maintain.

ABC Company plans to produce an array of plastic pails during the
upcoming budget year, all of which fall into a single product
category. Its sales budget forecast is outlined below and how it is

computed:
ABC Company
Sales Budget
For the Year Ended December 31, 20XX
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Forecasted unit sales 5,500.00 6,000.00 7,000.00 8,000.00
x Price per unit 10.00 10.00 11.00 11.00
Total gross sales 55,000.00 60,000.00 77,000.00 88,000.00
- Sales discounts & allowances 1,100.00 1,200.00 1,540.00 1,760.00
Total net sales 53,900.00 58,800.00 75,460.00 86,240.00