Lillie’s Manufacturing Company has budgeted the following unit sales: 2021 Units January 10,000 February 8,000 March 9,000 April 11,000 May 15,000 The finished goods units on hand on December 31, 2020, was 1,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $3 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2020 For the first quarter of 2021, prepare a direct material budget.
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.
Lillie’s Manufacturing Company has budgeted the following unit sales:
2021 Units
January 10,000
February 8,000
March 9,000
April 11,000
May 15,000
The finished goods units on hand on December 31, 2020, was 1,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $3 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2020
For the first quarter of 2021, prepare a direct material budget.
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