A company has provided a sales budget for the next four months. It bases its production budget on the sales budget, and has a policy that each month's ending inventory of finished product must be equal to 25% of the following month's sales needs. The direct materials purchase budget is based on the production budget. The company's policy for each month's ending inventory of raw materials is that they must be equal to 10% of the following month's production needs for raw materials. Given this information, the company can prepare direct materials purchases budgets for how many months? a. One b. Two c. Three d. Four
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.
A company has provided a sales budget for the next four months. It bases its production budget on the sales budget, and has a policy that each month's ending inventory of finished product must be equal to 25% of the following month's sales needs. The direct materials purchase budget is based on the production budget. The company's policy for each month's ending inventory of raw materials is that they must be equal to 10% of the following month's production needs for raw materials. Given this information, the company can prepare direct materials purchases budgets for how many months?
a. One
b. Two
c. Three
d. Four
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