Frieda Shilongo Ltd is preparing budgets. The company manufactures and sells one product. The selling price is $150 per unit. The budgeted sales volumes are as follows: January: 40 000 February: 50 000 March: 30 000 April: 45 000 Sales for May are expected to be 40 000 units. Each product uses the following material standard and of prices: Material X: 3kg at $9 per kg Material Y: 2kg at $6 per kg Material Z: 1kg at $25 per kg Stock of finished goods is budgeted at 20% of the next month period's sales and no stocks of components are held. Required (a) Prepare the following budgets for Frieda Shilong Ltd for each of the four (4) months. (i) Sales budget (in units and $) (ii) Production budget in units (iii) Material usage budget (in kg) (iv) Material budget (in $)
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.
Frieda Shilongo Ltd is preparing budgets. The company manufactures and sells one product. The selling price is $150 per unit. The budgeted sales volumes are as follows:
January: 40 000
February: 50 000
March: 30 000
April: 45 000
Sales for May are expected to be 40 000 units.
Each product uses the following material standard and of prices:
Material X: 3kg at $9 per kg
Material Y: 2kg at $6 per kg
Material Z: 1kg at $25 per kg
Stock of finished goods is budgeted at 20% of the next month period's sales and no stocks of components are held.
Required
(a) Prepare the following budgets for Frieda Shilong Ltd for each of the four (4) months.
(i) Sales budget (in units and $)
(ii) Production budget in units
(iii) Material usage budget (in kg)
(iv) Material budget (in $)
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