In Blossom Corporation's first year of operations, inadequate budgeting led to significant cost overruns in multiple production areas. Direct materials needed to be express-delivered, and laborers needed to be paid overtime because reasonable budgets weren't in place, nor were managers properly trained on how to use them. If adequate budgeting had been done, the company might have achieved its objectives that year. As year one comes to a close, all managers are now committed to creating and using accurate budgets for next year so they can properly plan for the resources to support production. The following information is in place to assist the management team in budgeting for year 2. Budgeted sales volume Additional information: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. (a1) Sales Volume 5,000 Selling Price Q1 Budgeted selling price is $82/unit. Desired ending FG Inventory is 25% of the following quarter's sales volume. Beginning FG Inventory on January 1 of Year 2 is expected to be just 730 units. Each unit requires 3 pounds of DM at an estimated cost of $4/pound. Desired ending DM Inventory is 20% of the following quarter's production needs. Each unit requires 1.2 DL hours at an estimated cost of $14/hour. Variable MOH is applied to units at a budgeted rate of $15/unit produced. Quarterly Fixed-MOH costs are expected as follows: depreciation on plant assets of $11,200, supervisors' salaries of $21,800, and property taxes and insurance of $5,500. Sales Revenue Variable SG&A expenses are budgeted at a rate of $3/unit sold. Quarterly fixed SG&A expenses are expected as follows: sales salaries of $14,200, advertising of $2,600, and executive and administrative salaries of $37,500. Prepare the quarterly sales budget for Blossom for its second year of operations. Present budgeted amounts for each quarter and for the year overall. $ Year 2 $ Q2 Q3 Q4 Q1 Q2 5,900 5,600 6,300 5,200 6,100 Year 3 Q1 $ Q2 $ $ Q3
In Blossom Corporation's first year of operations, inadequate budgeting led to significant cost overruns in multiple production areas. Direct materials needed to be express-delivered, and laborers needed to be paid overtime because reasonable budgets weren't in place, nor were managers properly trained on how to use them. If adequate budgeting had been done, the company might have achieved its objectives that year. As year one comes to a close, all managers are now committed to creating and using accurate budgets for next year so they can properly plan for the resources to support production. The following information is in place to assist the management team in budgeting for year 2. Budgeted sales volume Additional information: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. (a1) Sales Volume 5,000 Selling Price Q1 Budgeted selling price is $82/unit. Desired ending FG Inventory is 25% of the following quarter's sales volume. Beginning FG Inventory on January 1 of Year 2 is expected to be just 730 units. Each unit requires 3 pounds of DM at an estimated cost of $4/pound. Desired ending DM Inventory is 20% of the following quarter's production needs. Each unit requires 1.2 DL hours at an estimated cost of $14/hour. Variable MOH is applied to units at a budgeted rate of $15/unit produced. Quarterly Fixed-MOH costs are expected as follows: depreciation on plant assets of $11,200, supervisors' salaries of $21,800, and property taxes and insurance of $5,500. Sales Revenue Variable SG&A expenses are budgeted at a rate of $3/unit sold. Quarterly fixed SG&A expenses are expected as follows: sales salaries of $14,200, advertising of $2,600, and executive and administrative salaries of $37,500. Prepare the quarterly sales budget for Blossom for its second year of operations. Present budgeted amounts for each quarter and for the year overall. $ Year 2 $ Q2 Q3 Q4 Q1 Q2 5,900 5,600 6,300 5,200 6,100 Year 3 Q1 $ Q2 $ $ Q3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:In Blossom Corporation's first year of operations, inadequate budgeting led to significant cost overruns in multiple production areas.
Direct materials needed to be express-delivered, and laborers needed to be paid overtime because reasonable budgets weren't in
place, nor were managers properly trained on how to use them. If adequate budgeting had been done, the company might have
achieved its objectives that year.
As year one comes to a close, all managers are now committed to creating and using accurate budgets for next year so they can
properly plan for the resources to support production. The following information is in place to assist the management team in
budgeting for year 2.
Budgeted sales volume
Additional information:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
(a1)
Sales Volume
Selling Price
Sales Revenue
Q1
Q2
$
$
Year 2
Q3
Budgeted selling price is $82/unit.
Desired ending FG Inventory is 25% of the following quarter's sales volume.
Beginning FG Inventory on January 1 of Year 2 is expected to be just 730 units.
Each unit requires 3 pounds of DM at an estimated cost of $4/pound.
Desired ending DM Inventory is 20% of the following quarter's production needs.
Each unit requires 1.2 DL hours at an estimated cost of $14/hour.
Variable MOH is applied to units at a budgeted rate of $15/unit produced.
Quarterly Fixed-MOH costs are expected as follows: depreciation on plant assets of $11,200, supervisors' salaries of
$21,800, and property taxes and insurance of $5,500.
Variable SG&A expenses are budgeted at a rate of $3/unit sold.
Quarterly fixed SG&A expenses are expected as follows: sales salaries of $14,200, advertising of $2,600, and executive and
administrative salaries of $37,500.
Q4
Prepare the quarterly sales budget for Blossom for its second year of operations. Present budgeted amounts for each quarter and
for the year overall.
Q1
5,000 5,900 5,600 6,300 5,200 6,100
Q1
Year 3
$
$
Q2
Q2
$
$
Q3
19
549
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