produce 1 pound of roasted beans. The standard direct labor rate is $13 per direct labor hour. Variable overhead is applied at the rate of $82 per direct labor hour, and fixed overhead is budgeted at $13,300 per month, including $1,600 in equipment depreciation. Hurtt’s pays for 42 percent of its green coffee beans in the month of purchase and the remaining 58 percent in the month following the purchase. February’s purchases of green coffee beans are expected to total $25,800.
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.
EC 3 Q 3
Hurtt’s Java Seeds is an independent roaster of specialty coffee beans. During March, the company plans to sell 12,000 pounds of beans at $13 per pound. Internet sales account for 51 percent of total sales and are paid for by customers when they place their orders. Of the remaining 49 percent, three-fifths are paid for in the month of sale and two-fifths in the month following the sale. In February, roasted coffee bean sales are expected to total $99,800.
The company budgets 5 months ahead, so that in early January, it is time to plan for March. During March, the company plans to sell 19,000 pounds of beans. At the end of February, the company expects to have 2,000 pounds of raw green coffee beans (costing $5,900) and 830 pounds of roasted beans (costing $4,500) in inventory. Hurtt’s would like to have 1,600 pounds of green coffee beans and 560 pounds of roasted beans in inventory at the end of March. Hurtt’s purchases green coffee beans from the grower at $5 per pound and sells the roasted beans for $13 per pound.
Hurtt’s roasters hold 25 pounds of green coffee beans. It takes 17 minutes to roast the beans to perfection. Because the roaster must be monitored by an employee at all times, each batch requires 0.25 direct labor hours. During the roasting process, the green beans lose 20% of their weight, so that 1.25 pounds of green (raw) beans must be used to produce 1 pound of roasted beans. The standard direct labor rate is $13 per direct labor hour. Variable
Hurtt’s pays for 42 percent of its green coffee beans in the month of purchase and the remaining 58 percent in the month following the purchase. February’s purchases of green coffee beans are expected to total $25,800.
Variable selling and administrative expenses are 21 percent of sales, and fixed administrative expenses are $37,000 per month. Both are paid in the month incurred, as are direct labor costs and manufacturing overhead. In March, Hurtt’s must make a $38,000 payment on its long-term loan, of which $5,200 is interest.
At the end of February, Hurtt’s cash balance is expected to be $14,400. The company must maintain a minimum cash balance of $12,000 as a condition of a long-term loan. Any cash required to maintain the minimum balance can be borrowed in $1,000 increments at a 13 percent annual interest rate. Interest is paid only when principal is repaid. However, it is accrued at the end of every month.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
