QUESTION 7 BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets. The following budgeted information is available for the first three months of 2021. (i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be 24 000 units. It is anticipated that there will be a 5% increase in sales volume in every subsequent month up to April 2021. (ii.) The finished goods inventory level at the end of each month will be maintained at one-third of the expected sales volume in the following month. The inventory of finished goods at 31 December 2020 is expected to be 7500 units with a value of $242000. The finished goods inventory value at 31 March 2021 is expected to be $298000. (iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each month is expected to meet 20% of the production requirement of the following month. The inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The purchase price will remain at $1.50 per kilo. (iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing overhead is expected to be 50% of direct labor. REQUIRED (a) Prepare the sales budget for the period January to March 2021. State the units and revenue for each month. (b) Prepare the production budget for the period January to March 2021. State the units for each month. (c) Prepare the purchases budgets for the period January to March 2021. State the units and cost for each month.
QUESTION 7 BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets. The following budgeted information is available for the first three months of 2021. (i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be 24 000 units. It is anticipated that there will be a 5% increase in sales volume in every subsequent month up to April 2021. (ii.) The finished goods inventory level at the end of each month will be maintained at one-third of the expected sales volume in the following month. The inventory of finished goods at 31 December 2020 is expected to be 7500 units with a value of $242000. The finished goods inventory value at 31 March 2021 is expected to be $298000. (iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each month is expected to meet 20% of the production requirement of the following month. The inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The purchase price will remain at $1.50 per kilo. (iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing overhead is expected to be 50% of direct labor. REQUIRED (a) Prepare the sales budget for the period January to March 2021. State the units and revenue for each month. (b) Prepare the production budget for the period January to March 2021. State the units for each month. (c) Prepare the purchases budgets for the period January to March 2021. State the units and cost for each month.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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
Transcribed Image Text:QUESTION 7
BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets.
The following budgeted information is available for the first three months of 2021.
(i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be
24 000 units. It is anticipated that there will be a 5% increase in sales volume in every
subsequent month up to April 2021.
(ii.) The finished goods inventory level at the end of each month will be maintained at one-third of
the expected sales volume in the following month. The inventory of finished goods at
31 December 2020 is expected to be 7500 units with a value of $242000. The finished
goods inventory value at 31 March 2021 is expected to be $298000.
(iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each
month is expected to meet 20% of the production requirement of the following month. The
inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The
purchase price will remain at $1.50 per kilo.
(iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing
overhead is expected to be 50% of direct labor.
REQUIRED
(a) Prepare the sales budget for the period January to March 2021. State the units and revenue
for each month.
(b) Prepare the production budget for the period January to March 2021. State the units for each
month.
(c) Prepare the purchases budgets for the period January to March 2021. State the units and
cost for each month.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education