QUESTION 5 A) A company sells product X & Y Sales for the year ended 2019 are: X: 5000 units @ ¢10 each Y: 3000 units @ ¢12 each The company expects to sell the following units in 2020: X: 6000 units @ ¢15 each Y: 4500 units @ ¢18 each Additional information: i) Budgeted opening stock X: 1000 units Y: 800 units Budgeted closing stock: X: 2000 units Y: 1500 units ii) Materials A and B are used to produce products X and Y based on the following ratio in order to produce one unit of X & Y Product Material A Material B X 3kg 2kg Y 2kg 1kg Purchase price ¢10 per Kg ¢12 per kg iii) Material A Material B Opening stock 8000 5000 Closing stock 6000 3500 (iv) The company has only one grade of labour and uses 3 hours to produce one unit of X 2 hours to produce one unit of Y Labour rate would be ¢20 per hour Required: Prepare the following budgets for 2020 Sales budget Production budget Direct Material usage budget
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.
QUESTION 5
A) A company sells product X & Y
Sales for the year ended 2019 are:
X: 5000 units @ ¢10 each
Y: 3000 units @ ¢12 each
The company expects to sell the following units in 2020:
X: 6000 units @ ¢15 each
Y: 4500 units @ ¢18 each
Additional information:
i) Budgeted opening stock
X: 1000 units
Y: 800 units
Budgeted closing stock:
X: 2000 units
Y: 1500 units
ii) Materials A and B are used to produce products X and Y based on the following ratio in order to produce one unit of X & Y
Product Material A Material B
X 3kg 2kg
Y 2kg 1kg
Purchase price ¢10 per Kg ¢12 per kg
iii) Material A Material B
Opening stock 8000 5000
Closing stock 6000 3500
(iv) The company has only one grade of labour and uses
-
3 hours to produce one unit of X
-
2 hours to produce one unit of Y
Labour rate would be ¢20 per hour
Required:
Prepare the following budgets for 2020
-
Sales budget
-
Production budget
-
Direct Material usage budget
-
Direct Material purchase budget
-
Direct labour budget
B) Discuss FIVE (5) benefits of budgeting to organisations.
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