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Benefits of budgeting:

·Forces managers to look into the future

·Important communication role within organization

             ·Motivates and rewards employees (benchmark)

Participative budgeting: allows employees to have input into Budget-process

Budgeted production units = budgeted unit sales + budgeted Ending finished goods inventory – budgeted beginning finished goods inventory

Budgeted raw materials purchases = raw materials needed for Production + budgeted ending raw materials inventory – budgeted beginning raw Materials inventory

Ending cash balance = beginning cash balance + budgeted cash Receipts – budgeted cash payments +/- cash borrowed or repaid

Budgeted merchandise purchases = budgeted sales + budgeted Ending merchandise inventory – budgeted beginning merchandise inventory

Price Variance = (AQ x SP) – (AQ x AP)

Price variance = AQ x (SP-AP)

Quantity Variance = (SQ x SP) – (AQ x SP)

Quantity Variance = SP x (SQ – AQ)

Direct materials price variance = AQ x (SP – AP)

Direct materials quantity variance = SP x (SQ – AQ)

Direct labor Rate Variance = AH x (SR – AR)

Direct labor efficiency variance = SR x (SH – AH)

Variable overhead rate variance = AH x (SR – AR)

Variable overhead efficiency variance = SR x (SH – AH)

Fixed overhead spending variance = Budgeted fixed overhead – Actual fixed overhead

Fixed overhead rate (FOH) = total fixed overhead Costs/master budget planned production

Fixed overhead volume variance = (FOH Rate x AV) – (FOH Rate X Budgeted Volume)

FOH Rate x (AV – Budgeted Volume)

Expected capacity variance = FOH Rate x (Budgeted Volume – Practical Capacity)

Unexpected Capacity Variance = FOH Rate x (AV – Budgeted Volume)