Before the year began, the following static budget was developed for the estimated sales of 50,000 units. Sales are higher than expected and management needs to revise its budget. $ Sales revenue 1,250,000 Cost of goods sold: Direct material (450,000) Direct labour (500,000) Variable manufacturing overhead (125,000) Fixed manufacturing overhead (32,000) Total cost of goods sold (1,107,000) Gross profit 143,000 Variable sales and administration expenses (50,000) Fixed sales and administration expenses (105,000) Income before taxes (12,000) Taxes 1,800 Net income ($10,200) Required: (a) Prepare a flexible budget for 100,000 and 110,000 units of sales.
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.
Before the year began, the following static budget was developed for the estimated sales of
50,000 units. Sales are higher than expected and management needs to revise its budget.
$
Sales revenue 1,250,000
Cost of goods sold:
Direct material (450,000)
Direct labour (500,000)
Variable manufacturing
Fixed manufacturing overhead (32,000)
Total cost of goods sold (1,107,000)
Gross profit 143,000
Variable sales and administration expenses (50,000)
Fixed sales and administration expenses (105,000)
Income before taxes (12,000)
Taxes 1,800
Net income ($10,200)
Required:
(a) Prepare a flexible budget for 100,000 and 110,000 units of sales.
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