EFE company manufactures and sells boats. The company’s management accountant gathered the following data to prepare budgets for 2012; Direct Materials Requirements Material A 12 metres per boat Material B 14 square meter per boat Inventory data of Direct Materials are; Beginning Inventory Material A 5.000 meters Material B 2.400 square meters Inventory data of Finished Goods are; Beginning Inventory Target Ending Inventory Boats 1.000 units 3.000 units Moreover, unit purchase price of material A was $60 and unit purchase price of material B was $10. For the coming year 2021 it is expected that unit purchase price of material A will be $64 and unit purchase price of material B will not change. The company uses FIFO inventory method. Labor hours required to produce 1 boat is 3 hours and the company plans to pay $12 per hour. Company budgeted manufacturing overhead rate of $6 per labor hour. Finally, the company expects to sell 4000 boats in 2021 at an average unit selling price of $6000. a) Please prepare “revenues budget” for the year 2021. b) Please prepare “production budget” for the year 2021. c) Please prepare “direct material usage budget” in terms of quantity and monetary amount for the year 2021
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.
EFE company manufactures and sells boats. The company’s
|
Direct Materials Requirements |
|
Material A 12 metres per boat |
|
Material B 14 square meter per boat |
Inventory data of Direct Materials are;
|
Beginning Inventory |
|
|
Material A |
5.000 meters |
|
Material B |
2.400 square meters |
Inventory data of Finished Goods are;
|
Beginning Inventory |
Target Ending Inventory |
|
|
Boats |
1.000 units |
3.000 units |
Moreover, unit purchase price of material A was $60 and unit purchase price of material B was $10. For the coming year 2021 it is expected that unit purchase price of material A will be $64 and unit purchase price of material B will not change. The company uses FIFO inventory method. Labor hours required to produce 1 boat is 3 hours and the company plans to pay $12 per hour. Company budgeted manufacturing
Finally, the company expects to sell 4000 boats in 2021 at an average unit selling price of $6000.
a) Please prepare “revenues budget” for the year 2021.
b) Please prepare “production budget” for the year 2021.
c) Please prepare “direct material usage budget” in terms of quantity and monetary amount for the year 2021.
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