Mynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. Thefollowing information concerns operations for Year 2—the coming year—and for the first two quarters ofYear 3:a. The company’s single product sells for $8 per unit. Budgeted sales in units for the next six quarters areas follows (all sales are on credit):Year 3Year 2 Quarter Quarter1 2 3 4 1 2Budgeted unit sales ........... 40,000 60,000 100,000 50,000 70,000 80,000b. Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining25% in the following quarter. On January 1, Year 2, the company’s balance sheet showed $65,000in accounts receivable, all of which will be collected in the first quarter of the year. Bad debts arenegligible and can be ignored.c. The company desires an ending finished goods inventory at the end of each quarter equal to 30% of thebudgeted unit sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.d. Five pounds of raw materials are required to complete one unit of product. The company requires endingraw materials inventory at the end of each quarter equal to 10% of the following quarter’s productionneeds. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.e. The raw material costs $0.80 per pound. Raw material purchases are paid for in the following pattern:60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter.On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for rawmaterial purchases, all of which will be paid for in the first quarter of the year.Required:Prepare the following budgets and schedules for the year, showing both quarterly and total fi gures:1. A sales budget and a schedule of expected cash collections.2. A production budget.3. A direct materials budget and a schedule of expected cash payments for purchases of materials.
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.
Mynor Corporation manufactures and sells a seasonal product that has peak sales in the third quarter. The
following information concerns operations for Year 2—the coming year—and for the first two quarters of
Year 3:
a. The company’s single product sells for $8 per unit. Budgeted sales in units for the next six quarters are
as follows (all sales are on credit):
Year 3
Year 2 Quarter Quarter
1 2 3 4 1 2
Budgeted unit sales ........... 40,000 60,000 100,000 50,000 70,000 80,000
b. Sales are collected in the following pattern: 75% in the quarter the sales are made, and the remaining
25% in the following quarter. On January 1, Year 2, the company’s
in
negligible and can be ignored.
c. The company desires an ending finished goods inventory at the end of each quarter equal to 30% of the
budgeted unit sales for the next quarter. On December 31, Year 1, the company had 12,000 units on hand.
d. Five pounds of raw materials are required to complete one unit of product. The company requires ending
raw materials inventory at the end of each quarter equal to 10% of the following quarter’s production
needs. On December 31, Year 1, the company had 23,000 pounds of raw materials on hand.
e. The raw material costs $0.80 per pound. Raw material purchases are paid for in the following pattern:
60% paid in the quarter the purchases are made, and the remaining 40% paid in the following quarter.
On January 1, Year 2, the company’s balance sheet showed $81,500 in accounts payable for raw
material purchases, all of which will be paid for in the first quarter of the year.
Required:
Prepare the following budgets and schedules for the year, showing both quarterly and total fi gures:
1. A sales budget and a schedule of expected cash collections.
2. A production budget.
3. A direct materials budget and a schedule of expected cash payments for purchases of materials.
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