) Prepare the 2019 production budget (in unit) 2) Prepare the direct materials usage and purchases budgets.
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.
Case Study for REX Company.
Comprehensive operating budget. REX, Inc., manufactures and sells snowboards. REX
manufactures a single model, the Pipex. In the summer of 2018, REXS accountant gathered
the following data to prepare budgets for 2019:
Materials and labor requirements
Direct materials:
Wood 5 board feet per snowboard
Fiberglass 6 yards per snowboard
Direct manufacturing labor 5 hours per snowboard
REX’ CEO expects to sell 1,000 snow boards during 2019 at an estimated retail price of
$ 450 per board. Further, he expects 2019 beginning inventory of 100 boards, and would like
to end 2019 with 200 snowboards in stock.
Direct materials inventories
Beginning Inventory Ending Inventory
1/1/2019 12/31/2019
________________________________________________________
Wood 2,000 1,500
Fiberglass 1,000 2,000
Variable manufacturing
manufacturing labor-hour. There are also $ 66,000 in fixed
budgeted for 2019.REX combines both variable and fixed manufacturing overhead into a
single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at
the rate of $ 250 per sales visit. The marketing plan calls for 30 sales visits during 2019.
Finally, there are $ 30,000 in fixed nonmanufacturing costs budgeted for 2019.
Other data includes:
2018 Unit Price 2019 Unit Price
____________________________________________________________
Wood $28 per b.f. $ 30 per b.f.
Fiberglass $ 4.80 per yard $ 5 per yard
Direct manufacturing labor $ 24 per hour $ 25 per hour
The inventoriable unit cost for ending finished goods inventory on December 31, 2018 is
$ 374.80. Assume REX uses a first-in first-out inventory method for both direct materials
and finished goods. Ignore work in process in your calculation.
Required
Use the data and projections supplied by REXs’ managers. Prepare the 2019 revenues budget
(in $).(must apply formula eNdning inventory (+),(-) beginning inventory
1) Prepare the 2019 production budget (in unit)
2) Prepare the direct materials usage and purchases budgets.
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