A large St. Louis feed mill, Robert Orwig Processing,prepares its 6-month aggregate plan by forecasting demand for50-pound bags of cattle feed as follows: January, 1,000 bags;February, 1,200; March, 1,250; April, 1,450; May, 1,400; and June,1,400. The feed mill plans to begin the new year with no inventory left over from the previous year, and backorders are not permit-ted. It projects that capacity (during regular hours) for producing bags of feed will remain constant at 800 until the end of April, andthen increase to 1,100 bags per month when a planned expansionis completed on May 1. Overtime capacity is set at 300 bags permonth until the expansion, at which time it will increase to 400bags per month. A friendly competitor in Sioux City, Iowa, is alsoavailable as a backup source to meet demand—but can provideonly 500 bags total during the 6-month period. Develop a 6-monthproduction plan for the feed mill using the transportation method.Cost data are as follows:Regular-time cost per bag (until April 30) $12.00Regular-time cost per bag (after May 1) $11.00Overtime cost per bag (during entire period) $16.00Cost of outside purchase per bag $18.50Carrying cost per bag per month $ 1.00
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 large St. Louis feed mill, Robert Orwig Processing,
prepares its 6-month aggregate plan by
50-pound bags of cattle feed as follows: January, 1,000 bags;
February, 1,200; March, 1,250; April, 1,450; May, 1,400; and June,
1,400. The feed mill plans to begin the new year with no inventory
left over from the previous year, and backorders are not permit-
ted. It projects that capacity (during regular hours) for producing
bags of feed will remain constant at 800 until the end of April, and
then increase to 1,100 bags per month when a planned expansion
is completed on May 1. Overtime capacity is set at 300 bags per
month until the expansion, at which time it will increase to 400
bags per month. A friendly competitor in Sioux City, Iowa, is also
available as a backup source to meet demand—but can provide
only 500 bags total during the 6-month period. Develop a 6-month
production plan for the feed mill using the transportation method.
Cost data are as follows:
Regular-time cost per bag (until April 30) $12.00
Regular-time cost per bag (after May 1) $11.00
Overtime cost per bag (during entire period) $16.00
Cost of outside purchase per bag $18.50
Carrying cost per bag per month $ 1.00
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