Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,200 skis and 6,200 pounds of carbon fiber will be in inventory on June 30 of the current year and that 152,000 skis will be sold during the next (third) quarter. A set of two skis sells for $320. Management wants to end the third quarter with 3,700 skis and 4,200 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $17 per pound. Each ski requires 0.4 hours of direct labor at $22 per hour. Variable overhead is applied at the rate of $10 per direct labor hour. The company budgets fixed overhead of $1,784,000 for the quarter.
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.
oblem 22-1A Manufacturing: Preparing production and manufacturing budgets LO P1
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Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,200 skis and 6,200 pounds of carbon fiber will be in inventory on June 30 of the current year and that 152,000 skis will be sold during the next (third) quarter. A set of two skis sells for $320. Management wants to end the third quarter with 3,700 skis and 4,200 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $17 per pound. Each ski requires 0.4 hours of direct labor at $22 per hour. Variable overhead is applied at the rate of $10 per direct labor hour. The company budgets fixed overhead of $1,784,000 for the quarter.
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