From the course: Accounting Foundations: Managerial Accounting
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Budgeting for a merchandising organization
From the course: Accounting Foundations: Managerial Accounting
Budgeting for a merchandising organization
- Because merchandising companies buy products rather than make them, their budgeting process is less complicated than the budgeting done by manufacturing companies. For merchandising firm, the company would prepare a purchases budget, rather than a production budget. However, the format of the merchant's purchase budget would be very similar to that of the manufacturer's production budget. This figure compares the master budgeting process for a merchandising firm with that for a manufacturing firm. Merchandising companies replace four budgets the production budget, the direct materials budget, the direct labor budget, and the manufacturing overhead budget used by manufacturing firms with a single budget, the purchases budget. The purchases budget is similar to the materials budget we discussed previously in that the company must factor in its beginning inventory of product and its desired ending inventory by combining…
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