Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 90,000 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 450,000 units; third quarter, 525,000 units; and fourth quarter, 475,000 units. Company policy calls for the ending finished goods inventory of a quarter to equal 20% of the next quarter’s budgeted sales. Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.
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.
Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts
that ending finished goods inventory for the first quarter will be 90,000 units. The following unit
sales of the transmissions are expected during the rest of the year: second quarter, 450,000 units; third
quarter, 525,000 units; and fourth quarter, 475,000 units. Company policy calls for the ending finished
goods inventory of a quarter to equal 20% of the next quarter’s budgeted sales. Prepare a production budget
for both the second and third quarters that shows the number of transmissions to manufacture.
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