1. Prepare the company’s production budget for the upcoming fi scal year. 2. Prepare the company’s direct materials budget and schedule of expected cash disbursements for purchases of materials for the upcoming fi scal year.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The marketing department of Gaeber Industries has submitted the following sales
upcoming fi scal year:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted unit sales . . . . . . . 8,000 7,000 6,000 7,000
The company expects to start the fi rst quarter with 1,600 units in fi nished goods inventory.
Management desires an ending fi nished goods inventory in each quarter equal to 20% of the next
quarter’s budgeted sales. The desired ending fi nished goods inventory for the fourth quarter is
1,700 units.
In addition, the beginning raw materials inventory for the fi rst quarter is budgeted to be
3,120 pounds and the beginning accounts payable for the fi rst quarter is budgeted to be $14,820.
Each unit requires 2 pounds of raw material that costs $4.00 per pound. Management desires
to end each quarter with an inventory of raw materials equal to 20% of the following quarter’s
production needs. The desired ending inventory for the fourth quarter is 3,140 pounds. Management plans to pay for 75% of raw material purchases in the quarter acquired and 25% in the following quarter.
Required:
1. Prepare the company’s production budget for the upcoming fi scal year.
2. Prepare the company’s direct materials budget and schedule of expected cash disbursements
for purchases of materials for the upcoming fi scal year.
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