Instructions Prepare a sales budget for February. Prepare a production budget for February. Prepare a direct materials purchases budget for February. Prepare a direct labor cost budget for February.
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.
Sales, production, direct materials purchases, and direct labor cost budgets
The budget director of Royal Furniture Company requests estimates of sales, production, and other operating data from the various administrative units every month. Selected information concerning sales and production for February is summarized as follows:
a. Estimated sales of King and Prince chairs for February by sales territory:
Northern Domestic:
King..........................................610 units at $780 per unit
Prince .......................................750 units at $550 per unit
Southern Domestic:
King...........................................340 units at $780 per unit
Prince ....................................... 440 units at $550 per unit
International:
King..........................................360 units at $850 per unit
Prince .......................................290 units at $600 per unit
b. Estimated inventories on February 1:
Direct materials:
Fabric ...................... 420 sq. yds.
Wood ...................... 580 linear ft.
Filler ....................... 250 cu. ft.
Springs ................... 660 units
Finished products:
King.................... 90 units
Prince ..................25 units
c. Desired inventories on February 28:
Direct materials:
Fabric ...................... 390 sq. yds.
Wood ...................... 650 linear ft.
Filler ....................... 300 cu. ft.
Springs .....................540 units
Finished products:
King.................... 80 units
Prince ..................35 units
d. Direct materials used in production:
In manufacture of King:
Fabric ........................................6.0 sq. yds. per unit of product
Wood ........................................ 38 linear ft. per unit of product
Filler ......................................... 4.2 cu. ft. per unit of product
Springs ....................................... 16 units per unit of product
In manufacture of Prince:
Fabric ........................................ 4.0 sq. yds. per unit of product
Wood ........................................ 26 linear ft. per unit of product
Filler ......................................... 3.4 cu. ft. per unit of product
Springs ....................................... 12 units per unit of product
Instructions
- Prepare a sales budget for February.
- Prepare a production budget for February.
- Prepare a direct materials purchases budget for February.
- Prepare a direct labor cost budget for February.
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