Angelo Limited is preparing its budget for the next year. It produces and sells a single product. The expected sales for the first 4 months of next year are: Month January February March April Production units 10,500 12,700 14,200 16,100 The product requires 2.5 kg of Material A1 per unit. It is the company’s policy to hold in inventory at the end of a month 20% of the material requirement for the following month. Calculate the material purchases for the month of February based on the information provided. Production cost is: The total overhead cost incurred in producing products. The total of the direct costs and the production overhead cost incurred. The total of the direct costs incurred in production. The cost of direct material, direct labour and indirect labour incurred in production.
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.
- Angelo Limited is preparing its budget for the next year. It produces and sells a single product. The expected sales for the first 4 months of next year are:
|
Month |
January |
February |
March |
April |
|
Production units |
10,500 |
12,700 |
14,200 |
16,100 |
The product requires 2.5 kg of Material A1 per unit. It is the company’s policy to hold in inventory at the end of a month 20% of the material requirement for the following month.
Calculate the material purchases for the month of February based on the information provided.
Production cost is:
- The total
overhead cost incurred in producing products. - The total of the direct costs and the production overhead cost incurred.
- The total of the direct costs incurred in production.
- The cost of direct material, direct labour and indirect labour incurred in production.
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