Casey Limited, which manufactures a single product, is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. The following information is available: $/unit Direct materials 2 Direct labour 8 10 Selling price 35 Fixed production overheads are budgeted to be $25,000 per month and are absorbed on an activity level of 10,000 units per month. For the month in question, sales are expected to be 8,000 units although production units will be 10,000 units. Fixed selling costs of $15,000 per month will incurred and the variable selling costs would be $0.20 per unit. There are no opening Inventory. Required: Prepare the budgeted profit and loss account for a month for Casey Limited using absorption costing. Clearly show the valuation of any Inventory figures.
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.
Casey Limited, which manufactures a single product, is considering whether to use marginal or absorption costing to report its budgeted profit in its
The following information is available:
$/unit
Direct materials 2
Direct labour 8
10
Selling price 35
Fixed production overheads are budgeted to be $25,000 per month and are absorbed on an activity level of 10,000 units per month.
For the month in question, sales are expected to be 8,000 units although
production units will be 10,000 units.
Fixed selling costs of $15,000 per month will incurred and the variable selling costs would be $0.20 per unit.
There are no opening Inventory.
Required:
Prepare the budgeted
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