A Sales Manager of S Ltd. has prepared sales budget for the next few months as follows: Month No. of units June 4,000 July 3,500 August 4,500 September 6,000 (i) There are 950 units in stock as on 1st June and it is a policy of S Ltd. to have stock at the end of each month to cover 20% of the next month’s sales. (ii) Four kg of Part X are required to manufacture one unit. Company holds stocks of Part X at the end of each month to cover 40% of next month’s production. 5920 kg of Part X are in stock as on 1st July. Prepare, (a) Production Budget for the months June, July, August.
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 Sales Manager of S Ltd. has prepared sales budget for the next few months as follows:
|
Month |
No. of units |
|
June |
4,000 |
|
July |
3,500 |
|
August |
4,500 |
|
September |
6,000 |
(i) There are 950 units in stock as on 1st June and it is a policy of S Ltd. to have stock at the end of each month to cover 20% of the next month’s sales.
(ii) Four kg of Part X are required to manufacture one unit. Company holds stocks of Part X at the end of each month to cover 40% of next month’s production. 5920 kg of Part X are in stock as on 1st July.
Prepare,
(a) Production Budget for the months June, July, August.
(b) Purchase Budget for Part X for the month of JULY.
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