This summary presents the complete cycle of the Browning Manufacturing Company’s budgeted yearly operations from the purchase of goods and services through their various stages of conversion to completion of the finished product to the sale of this product. All costs and cash receipts and disbursements involved in this cycle are presented, including the provision for federal income taxes and the payment of dividends.
The management was particularly interested in the budget’s year-end cash position. The company’s goal was to have a year-end cash balance of approximately $150,000 after paying off at least $350,000 and possibly as much as $400,000 of the note payable to the bank (not listed as a transaction in the budget). In addition, the company’s budgeted year-end investment in inventory was of interest to management who had decided to work toward improving the company’s inventory turnover ratio. Management was also aware of the need to maintain its satisfactory trade credit relationship with suppliers.