Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.
Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,200 units per hour and on average half an hour maintenance is required in each shift. The plant actually operates only 25 days per month. Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units per month this year due to the entry of a competitor with aggressive marketing capabilities. However, the demand is unlikely to be affected in future and will be around 650,000 per month in the long run. Assume a calendar year of 360 days and 30 days per month.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
- Determine the budgeted capacity level (in units) under:
- Theoretical capacity
- Practical capacity
- Normal capacity utilization
- Master-budget utilization
Transcribed Image Text:Nancy Inc., a manufacturing firm, is able to produce 1,500 T-shirts per hour, at maximum
efficiency. There are three eight-hour shifts each day.
Due to unavoidable operating interruptions, production averages 1,200 units per hour and on
average half an hour maintenance is required in each shift. The plant actually operates only
25 days per month.
Based on the year 2020 budget, Nancy estimates that it will be able to sell only 625,000 units
per month this year due to the entry of a competitor with aggressive marketing capabilities.
However, the demand is unlikely to be affected in future and will be around 650,000 per
month in the long run.
Assume a calendar year of 360 days and 30 days per month.
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