Miami Solar manufactures solar panels for industrial use. The company budgets production of 4,500 units (solar panels) in July and 5,700 units in August. Each unit requires 2 pounds of direct materials, which cost $7 per pound. The company’s policy is to maintain direct materials inventory equal to 40% of the next month’s direct materials requirement. As of June 30, the company has 3,600 pounds of direct materials in inventory. Prepare the direct materials budget for July. MIAMI SOLAR Direct Materials Budget July Units to produce 4,500 Materials needed for production (pounds) Total materials required (pounds) Materials to purchase (pounds) Cost of direct materials purchases
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.
Miami Solar manufactures solar panels for industrial use. The company budgets production of 4,500 units (solar panels) in July and 5,700 units in August.
Each unit requires 2 pounds of direct materials, which cost $7 per pound. The company’s policy is to maintain direct materials inventory equal to 40% of the next month’s direct materials requirement. As of June 30, the company has 3,600 pounds of direct materials in inventory. Prepare the direct materials budget for July.
| MIAMI SOLAR | |
| Direct Materials Budget | |
| July | |
| Units to produce | 4,500 |
| Materials needed for production (pounds) | |
| Total materials required (pounds) | |
| Materials to purchase (pounds) | |
| Cost of direct materials purchases |
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