Production and purchases budgets Osage Inc. has actual sales for May andJune and forecast sales for July, August, September, and October as follows:Actual:May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900 unitsJune . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 unitsForecast:July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 unitsAugust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800 unitsSeptember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 unitsOctober . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,700 unitsRequired:a. The firm’s policy is to have finished goods inventory on hand at the end ofthe month that is equal to 70% of the next month’s sales. It is currently estimated that there will be 4,400 units on hand at the end of June. Calculate the number of units to be produced in each of the months of July, August, and September.b. Each unit of finished product requires 6.5 pounds of raw materials. The firm’s policy is to have raw material inventory on hand at the end of each month that is equal to 60% of the next month’s estimated usage. It is currently estimated that 26,000 pounds of raw materials will be on hand at the end of June. Calculate the number of pounds of raw materials to be purchased in each of the months of July and August.
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.
Production and purchases budgets Osage Inc. has actual sales for May and
June and
Actual:
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900 units
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 units
Forecast:
July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 units
August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800 units
September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 units
October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,700 units
Required:
a. The firm’s policy is to have finished goods inventory on hand at the end ofthe month that is equal to 70% of the next month’s sales. It is currently estimated that there will be 4,400 units on hand at the end of June. Calculate the number of units to be produced in each of the months of July, August, and September.
b. Each unit of finished product requires 6.5 pounds of raw materials. The firm’s policy is to have raw material inventory on hand at the end of each month that is equal to 60% of the next month’s estimated usage. It is currently estimated that 26,000 pounds of raw materials will be on hand at the end of June. Calculate the number of pounds of raw materials to be purchased in each of the months of July and August.
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