Streamline your sales budget planning for Operations

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[Music] hi guys so our topic for today will be all about budgeting because without budgeting of course and then of course famous example will be your mom because a future so budgeting is actually a plan express in quantitative terms a big s without cost or without these quantitative terms so plan now or budgeting is rather is a plan expressed in quantitative terms right that is only effective for a given budget period so many times budget period so budget period this is actually the certain period of time in the future right that the budget is actually effective because possible name budget and effective for the next year fair for the coming year ineffective so here in budgeting the master budget sir no young master budget master budget is actually the overall plan of the entire or organization once again master budget is the overall plan of the company budgeted income statement right budgeted balance sheet regular guys i but i don't so this operational budget the starting point is actually the sales budget sir bucket for sales budget sales budget because right this is actually the cornerstone or foundation of budgeting meaning all other budgets let's say production budget etcetera etcetera will actually depend sales budget a big sales budget is the first step in preparing the master budget then after mumma compute young sales production budget because budget to compute the cost of goods sold budget and that's just the budgeted sales minus i mean based on cost of which also production budget next will be the budgeted gross profit which is obviously just the budgeted sales minus the budgeted cost of goods operating expense budget budgeted net income so these are the budgets operational budget next quantities of financial budgets a financial budget normally expenditure budget surrendering capital expenditure budget nothing for purchase off all right let's say property plant and equipment actually indeed discuss a vision because this will be discussed on the other videos right party and non-capital budgeting then last will be of course the budgeted statement of financial position where in here you're let's now try to solve illustrative number one ready so here carson incorporated produces office supplies including pencils pencils are bundled in packages then each package sells for 20 pesos the sales budget for the first four months of the year follows for these products on maritime sales january february march and april company policy requires that ending inventories for each month to be 10 of next month's sale so ending inventory donating will be 10 of next month sales however due to the greater sales in december than anticipated the ending inventory of pencils so december or for that month is only equal to 5000 packages so what's the requirement here the requirement here is to prepare a production budget for the first quarter of the year show the number of units that should be produced each month as well as for the quarter in total so first quarter this is equal to the beginning inventory plus production minus ending that's why production will be squeezed later on so he is nothing in production so illinois in january time one hundred thousand one hundred thousand so february that's one hundred twenty thousand then for march that's 110 000. so total sales snapping for the whole quarter is equal to 100 000 plus 120 000 plus 110 000 but this is equal to three hundred thirty thousand we're good right ten percent the next month sales smoking ending inventory so ending inventory in january is ten percent then salesman in february right so ten percent of one twenty is actually equal to twelve thousand ending inventory on february on the other hand is ten percent now sales on march so one ten times ten percent is eleven thousand then lastly ending inventory on march is indeed ten percent nato all right sales quarter seven percent no salesman so march and that's one hundred thousand ten percent of that one is actually equal to ten surprises all right so sorry the total sales because the ending inventory for the quarter or for a given quarter is the ending inventory for the last month of that quarter meaning last month and first quarter is march young ending inventory in march which is ten thousand american ending inventory nothing for the whole quarter for this period is your ending inventory for the last period so if ending inventory in january is 12 beginning inventory and in february 11 000 ending in february beginning of march then 5 000 ending non-december meaning beginning nothing say january all right that will be the beginning rather that is a beginning that will be the beginning inventory of the first month in any given quarter once the first quarter is january in bixby beginning inventory in january is 5000 yen beginning inventory in boom quarter so trying to squeeze the production one hundred thousand plus twelve thousand minus five thousand or this is equal to one hundred seven thousand next one twenty thousand plus eleven thousand minus twelve thousand or this is equal to one hundred nineteen thousand and last another ten thousand plus ten thousand minus eleven thousand but this is equal to one hundred nine thousand paginating seven thousand plus one hundred nineteen 000 plus 109 000. is 335 thousand and then prove nothing automatically 5 plus 335 minus 10 is actually equal to 330. 000 right so this will be the production budget for the first quarter we're good let's now move on here in illustrative problem number two anna so here in illustrative problem number two morning company produces a variety of labels including iron on name labels which are sold to partners comp bounded children the comps require campers to have their own name on every article of clothing each roll consists of 10 yards of paper stripped with 500 copies of the child's name each yard of paper strip costs 2 pesos right money has budgeted production of the liberal rules for the next four months as follows so given production nothing for the next four months next inventory policy once again inventory policy requires sufficient paper strip b in ending inventory to satisfy 25 percent of the following months production needs the inventor of paper strip at the beginning of march equals exactly the amount needed to satisfy the inventory policy we're good so now prepare a direct material purchases for march april and may showing purchases in units and in pesos for each month and in total right consists of ten yards a beginning sabihin young raw materials use nothing once again raw materials used now is equal to six thousand times ten or this is equal to sixty thousand nine thousand times ten is equal to ninety thousand fifteen thousand times ten is one hundred fifty thousand then lastly ten thousand times ten is equal to one hundred thousand we're good now compute nothing new ending so 25 now 60 000 is actually equal to 15 000 at union ending inventory in february ending inventory nothing in march is fifteen percent i mean twenty five percent now ninety thousand so ninety thousand times twenty five percent this is equal to twenty two thousand five hundred for april that is equal to 25 to 150 so 150 times 25 is equal to 37 500 then the ending inventory of may is 25 of 100 000 which is 25 000. so how do we normally once again how do we normally compute the raw materials used so raw material use is equal to the raw materials beginning plus the raw materials purchases then minus the raw materials at the end of the period so this is the computation of the raw materials used see raw materials purchases march april may and then total so raw material juice no completeness ending inventory so march is 22 500. ending inventory is april is 37 500. ending inventory summary is equal to 25 000. so illustrative problem number one young ending inventory at the end or eric will be the ending inventor in opina dullum one meaning june 25 000 ending inventory made next beginning inventory will be the ending inventory last year ending inventory in february is 15 so beginning inventory on march is 15. ending inventory of march is 20 to 5 so beginning in april and then ending inventory in april is thirty seven five so my beginning yen now may at the beginning inventory nothing is a total beginning inventory new march which is fifteen thousand so try now nothing is squeezing purchases sixty thousand plus twenty two thousand five hundred minus fifteen thousand this is actually equal to sixty seven thousand five hundred next ninety thousand plus thirty seven thousand five hundred minus twenty two thousand five hundred or this is equal to one hundred five thousand for the month of may 150 plus 000 five thousand minus thirty seven thousand five hundred or this is equal to one hundred thirty seven thousand five hundred trillion one 150 000 plus 25 000 minus 37.5 137.5 hence the total that's 300 000 plus 25 000 and then minus 15 000 or this is equal to 300 ten thousand patonia nothing sixty seven five plus one or five thousand plus one three seven five hundred but that's three hundred ten thousand all right so these are the purchases in units right so parama raw materials purchases in terms of peso amount multiply mulan raw materials purchases in units and purchases nothing so much is equal to hundred thirty five thousand paras that's 105 times two or this is equal to two hundred ten thousand parasame that's 137 500 times two or this is 275 000 then your total is 3 10 times 2 or this is 6 20. then patonnayanathan 135 000 plus 210 000 and plus 275 000 or this is six hundred twenty thousand so these are the final answers for requirement letter alpha lanag requirement letter bravo each roll of labels right produce requires on average 0.05 direct labor the average cost of direct labor is 60 pesos per hour so prepare a direct labor budget for march april and april showing the hours needed and the direct labor cost for each month and in total march april may that's equal to 9 000. and for the month of may once again that's equal to 15 000. and this will give us a total of 30 zero five of direct labor so times point zero five point zero five point zero five and point zero five mahogany budgeted direct labor so let them hours directly bro starting so much that's six thousand times point zero five or this is equal to three hundred for april nine thousand times point zero five or this is equal to four fifty for me that's 15 000 times 0.05 or this is equal to 750 then total that's 30 000 times 0.05 or this is equal to 1000 five hundred or inadmitted one five then try nothing 300 plus 450 plus 750 or that's equal to one thousand five hundred hour is 60 so times 60 60 60 and 60 maco computer attenuating direct labor cost right so magana direct labor costs nothing so much this is 300 times 60 or this is equal to 18 000 pesos it's april this is 450 times 60 or this is equal to 27 000 for me this is 750 times 60 but this is 45 000 pesos and lastly for the total that's 1500 times 60 or this is equal to 90 000 pesos try nothing add eighteen thousand plus twenty seven thousand plus forty five thousand as you can see ninety thousand parinian right so final answer for requirement letter bravo that is a new requirement the direct labor hours and the direct labor cost final answer will be three hundred four fifty seven fifty and one five and also eighteen thousand twenty seven thousand forty five thousand and ninety thousand for the direct labor cost right so this is the end of this video so part two now budgeting financial budget so hopefully thank you guys for watching bye bye