On January 1, 2016 the ABC Company budget committee reached agreement on the following data for the 1 year ending December 31, 2016. Expected sales unit: Last quarter in 2015 was 4,000, with 1,000-unit increases in each succeeding quarter for 2016 and 2017. Ending finished goods inventory: 30% of the next quarter’s expected sales units Ending raw material inventory: 20% of the next quarter’s production requirements ABC Company ending raw materials and finished goods inventories at December 31, 2015, follow the same percentage relationships to production and sales that occur in 2016. 5 gram of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $2 per gram. Two hours of direct labor with hourly wage $5 are required to produce each unit of finished goods. The table below also shows the expected manufacturing overhead costs of ABC Company’s for the period 2016 which variable costs to fluctuate with the production unit on the basis of the following rates per direct labor hour with some maintenance costs also recognizing fixed costs each quarter. Utilities $0.50 / hour Indirect labor $0.50 / hour Indirect materials $0.35 / hour Depreciation $2,000 maintenence $0.20 / hour Manager salaries $10,000 maintenence $3,500 Property taxes and insurance $3,500 As for operating, ABC Company has budget projects which combine into one budget, classifies as selling and administrative expenses. Which contains sales commissions $2 and freight-out $1 based on the expected unit sales. Also the 1st quarter of advertising cost $4,000, and increased 10% for each quarter. Salaries of office and sales is $4,000 and $8,000 respectively. With $1,000 depreciation and property taxes and insurance at $1,500 for each quarter in 2016. Instructions (a) Prepare a sales budget by quarter for 1 year ended December 31, 2016. (Price $90) (b) Prepare a production budget by quarters for 1 year ended December 31, 2016. (c) Prepare a direct materials budget by quarters for 1 year ended December 31, 2016.
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.
- On January 1, 2016 the ABC Company budget committee reached agreement on the following data for the 1 year ending December 31, 2016.
|
Expected sales unit: |
Last quarter in 2015 was 4,000, with 1,000-unit increases in each succeeding quarter for 2016 and 2017. |
|
Ending finished goods inventory: |
30% of the next quarter’s expected sales units |
|
Ending raw material inventory: |
20% of the next quarter’s production requirements |
ABC Company ending raw materials and finished goods inventories at December 31, 2015, follow the same percentage relationships to production and sales that occur in 2016. 5 gram of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $2 per gram. Two hours of direct labor with hourly wage $5 are required to produce each unit of finished goods.
The table below also shows the expected
|
Utilities |
$0.50 / hour |
Indirect labor |
$0.50 / hour |
|
Indirect materials |
$0.35 / hour |
|
$2,000 |
|
maintenence |
$0.20 / hour |
Manager salaries |
$10,000 |
|
maintenence |
$3,500 |
Property taxes and insurance |
$3,500 |
As for operating, ABC Company has budget projects which combine into one budget, classifies as selling and administrative expenses. Which contains sales commissions $2 and freight-out $1 based on the expected unit sales. Also the 1st quarter of advertising cost $4,000, and increased 10% for each quarter. Salaries of office and sales is $4,000 and $8,000 respectively. With $1,000 depreciation and property taxes and insurance at $1,500 for each quarter in 2016.
Instructions
(a) Prepare a sales budget by quarter for 1 year ended December 31, 2016. (Price $90)
(b) Prepare a production budget by quarters for 1 year ended December 31, 2016.
(c) Prepare a direct materials budget by quarters for 1 year ended December 31, 2016.
(d) Prepare a direct labor budget by quarters for 1 year ended December 31, 2016.
(e) Prepare a manufacturing overhead budget for 1 year ended December 31, 2016. (Hint: MOH rate per DL in 2 decimal places)
(f) Prepare a selling and administrative expense budget for 1 year ended December 31, 2016.
(g) Prepare a
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