CHAPTER 9

#4 Why do successful companies tend to use the bottom-up approach to

budgeting?
As we all know that budgeting is one of the most important aspects to be
prioritized in every business. A successful company always starts with the scratch
where involvement of the employees in the organization should be considered. In this
bottom-up approach, the involvement of the employees has a huge impact on
establishing the operational budget. The lower employees are more knowledgeable
when it comes to the accuracy of budget information. Therefore, an employee's
involvement in the budgeting process increases the likelihood employees will accept the
budget.

#5 Briefly describe the components of a master budget for a manufacturing

organization
In a budgeting process, master budget comprises the budget schedules which
concerns the agenda of organization for the succeeding periods. These periods can be
prepared monthly, quarterly or annually depending on the internal control of the
organization. This master budget consists of necessary information such as sales,
production, operating expenses and capital expenditures. This master budget serves as
the basis for the financial performance of the company. Managers use this information
for the creation of financial statements.

#6 Why is the sales budget the most important component of the master
budget?
In a master budget, the Sales budget is the initial phase or starting point. During
business operations, the management always estimates the units of products the
organization expects to sell, considering also the expected sales per unit. The sales
budget is an important component of the master budget since it is the important driver
among all the budgets concerned.
#8 Describe how units to be produced are calculated in the production budget.
The production budget is an estimate of units to be produced and is based on
sales projections plus an estimate of desired ending finished goods inventory less
beginning finished goods inventory. In simplified terms, Sum of expected sales in
units and desired units of ending inventory less the units in beginning inventory is equal
to the units to be produced.

#10 Why is depreciation deducted at the bottom of the manufacturing overhead

budget?
It is simply that depreciation is not a cash transaction therefore it is deducted from
the bottom of manufacturing overhead budget. Aside from that, it aims to determine the
cash payments for overhead.

EXERCISE A

#28 “Sales and Production Budgets. Templeton Corporation

A. Prepare a sales budget for Templeton Corporation using a format similar to

. (Hint: be sure to increase last year’s unit sales by 10 percent.)
 B. Prepare a production budget for Templeton Corporation using a format
similar to.

29 to 31. Templeton Corporation

A. Prepare a direct materials purchases budget for Templeton Corporation

using a format similar to .
 B. Prepare a direct labor budget for Templeton Corporation using a format
similar to .

Manufacturing Overhead Budget. Templeton Corporation

Budgets for Cash Collections from Sales and Cash Payments for Purchases.
Templeton Corporation

A. Prepare a budget for cash collections from sales. Use a format similar to
the top section of

B. Prepare a budget for cash payments for purchases of materials. Use a

format similar to the middle section of. Round to the nearest dollar