- Production The budget production volumes in units are: August 1,650 July 1,450 September 2,120 October 2,460 Variable production cost The budgeted variable production cost is $90 per unit, comprising: $ Direct materials 60 Direct labour 10 Variable production overheads Total variable cost 20 90 Direct materials: Payment for purchases will be made in the month following receipt of materials. There will be no opening inventory of materials in July. It will be company policy to hold inventory at the end of each month equal to 20% of the following month's production requirements. Direct labour will be paid in the month in which the production occurs. Variable production overheads: 65% will be paid in the month in which production occurs and the remainder will be paid one month later. Fixed overhead costs Fixed overheads are estimated at $840,000 per annum and are expected to be incurred in equal amounts each month. 60% of the fixed overhead costs will be paid in the month in which they are incurred and 15% in the following month. The balance represents depreciation of noncurrent assets.
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.
Required
1. Prepare a cash receipts budget schedule for each of the first three months (July – September), including the total receipts per month
2. Prepare a material purchases budget schedule for each of the first three months (July – September), including the total purchases per month
3. Prepare a cash budget for the month of July. Include the owners’ cash contributions
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