Pargo Company is preparing its master budget for 2022. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 36%, respectively. The unit selling price is expected to be $40 for the first three quarters and $45 beginning in the fourth quarter. Sales in the first quarter of 2023 are expected to be 20% higher than the budgeted sales for the first quarter of 2022. Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $12 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2023 are 450,000 pounds. Prepare the production, and direct materials budgets by quarters for 2022. If you can solve this that would be appreciated.
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.
Pargo Company is preparing its
| Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 36%, respectively. The unit selling price is expected to be $40 for the first three quarters and $45 beginning in the fourth quarter. Sales in the first quarter of 2023 are expected to be 20% higher than the budgeted sales for the first quarter of 2022. |
| Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume. |
| Direct materials. Each unit requires 2 pounds of raw materials at a cost of $12 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2023 are 450,000 pounds. |
Prepare the production, and direct materials budgets by quarters for 2022.
If you can solve this that would be appreciated.
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