Prepare a direct materials purchasing plan for January, February, and March, based on the following facts: Lana Gonzales owns a business that assembles ceiling fan units. Each fan requires one motor system and four blades. Motors cost $40 each, and blades are $3.50 each. Lana is able to reliably obtain motors as needed, and does not maintain them in inventory. However, blades are stocked in inventory sufficient to produce 30% of the following month's expected production. Planned production is as follows: January 10,000 February 12,000 March 15,000 April 11,000 In accordance with the stocking plan, January's beginning inventory included 12,000 blades. Direct materials purchasing plan: Raw materials needed: Motors (1 per unit) Estimated cost per motor Total estimated motor cost Fan Blades (4 per unit) Plus: Target ending raw material * Fan blades needed Less: Target beginning raw material * Fan blade purchases Estimated cost per blade Total estimated motor blade Total estimated costs (motors + blades)
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.
Prepare a direct materials purchasing plan for January, February, and March, based on the following facts:
Lana Gonzales owns a business that assembles ceiling fan units. Each fan requires one motor system and four blades. Motors cost $40 each, and blades are $3.50 each. Lana is able to reliably obtain motors as needed, and does not maintain them in inventory. However, blades are stocked in inventory sufficient to produce 30% of the following month's expected production. Planned production is as follows:
| January | 10,000 |
| February | 12,000 |
| March | 15,000 |
| April | 11,000 |
In accordance with the stocking plan, January's beginning inventory included 12,000 blades.
Direct materials purchasing plan:
Raw materials needed:
| Motors (1 per unit) |
| Estimated cost per motor |
| Total estimated motor cost |
| Fan Blades (4 per unit) |
| Plus: Target ending raw material * |
| Fan blades needed |
| Less: Target beginning raw material * |
| Fan blade purchases |
| Estimated cost per blade |
| Total estimated motor blade |
| Total estimated costs (motors + blades) |
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