Assume that The AM Bakery is preparing a budget for the month ending October 31. Management prepares the budget by starting with the actual results for August 31. Next, management considers what the differences in costs will be between August and October. Management expects revenue in October to be 15 percent more than In August, and it expects all ingredient costs (e.g. flour, butter. and so on) to be 15 percent higher in October than in August. Management expects "other" labor costs to be 20 percent higher in October than in August, partly because more labor will be required in October and partly because employees will receive a pay raise. The manager will receive a pay raise that will increase his salary from $5,300 in August to $5,880 in October. Rent, utilities, and marketing costs are not expected to change. Required: Prepare a budget for The AM Bakery for October. Ingredients Flour Butter OF Fruit Nuts Chocolate Other Total ingredients Labor For the Month Ending October 31 Actual (August) Channel manager Other Utilities Rent THE AM BAKERY Bakery Sales Budgeted Costs Marketing Total bakery cost Ravenues $ S S 4.700 4.300 Budgeted (October) 2.500 2.100 1,700 1.200 800 17,300 $ 5.300 11.500 3.200 4.400 800 $ 42.300 S 5 60.200
Assume that The AM Bakery is preparing a budget for the month ending October 31. Management prepares the budget by starting with the actual results for August 31. Next, management considers what the differences in costs will be between August and October. Management expects revenue in October to be 15 percent more than In August, and it expects all ingredient costs (e.g. flour, butter. and so on) to be 15 percent higher in October than in August. Management expects "other" labor costs to be 20 percent higher in October than in August, partly because more labor will be required in October and partly because employees will receive a pay raise. The manager will receive a pay raise that will increase his salary from $5,300 in August to $5,880 in October. Rent, utilities, and marketing costs are not expected to change. Required: Prepare a budget for The AM Bakery for October. Ingredients Flour Butter OF Fruit Nuts Chocolate Other Total ingredients Labor For the Month Ending October 31 Actual (August) Channel manager Other Utilities Rent THE AM BAKERY Bakery Sales Budgeted Costs Marketing Total bakery cost Ravenues $ S S 4.700 4.300 Budgeted (October) 2.500 2.100 1,700 1.200 800 17,300 $ 5.300 11.500 3.200 4.400 800 $ 42.300 S 5 60.200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Assume that The AM Bakery is preparing a budget for the month ending October 31. Management prepares the budget by starting
with the actual results for August 31. Next, management considers what the differences in costs will be between August and October.
Management expects revenue in October to be 15 percent more than in August, and it expects all ingredient costs (eg, flour, butter.
and so on) to be 15 percent higher in October than in August. Management expects "other" labor costs to be 20 percent higher in
October than In August, partly because more labor will be required in October and partly because employees will receive a pay raise.
The manager will receive a pay raise that will increase his salary from $5,300 in August to $5.880 in October. Rent, utilities, and
marketing costs are not expected to change.
Required:
Prepare a budget for The AM Bakery for October.
Ingredients
Flour
Butter
OI
Fruit
Nuts
THE AM BAKERY
Bakery Sales
Budgeted Costs
For the Month Ending October 31
Actual
(August)
Chocolate
Other
Total ingredients
Labor
Channel manager
Other
Utilities
Rent
Marketing
Total bakery cost
Ravenues
$
S
S
5
5
4.700
4.300
2.500
2.100
1,700
Budgeted
(October)
1:200
BOO
17.300 S
5.300
11.500
3.200
4.400
800
0
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