How many kg of material X are required for production in the year?
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.
J Co makes a component M which uses 3 kg of raw material X. The opening inventory at the start of
next year is expected to be as follows.
Opening inventory of raw material X 5,000 kg @ $4
Opening inventory of component M 2,000 units
Sales of component M for the year are budgeted at 48,000 units. Production and sales are budgeted to
occur evenly throughout the year.
Closing inventory at the end of the year is budgeted as follows.
Closing inventory of raw material X One month's worth of production
Closing inventory of component M Two months' worth of sales
(b) How many kg of material X are required for production in the year?
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