Required: . What raw materials cost would be included in the company's flexible budget for March? Raw material cost
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.
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Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct
labor-hours and its standard cost card per unit is as follows:
$ 55.00
Direct material: 5 pounds at $11.00 per pound
Direct labor: 3 hours at $12 per hour
Variable overhead: 3 hours at $7 per hour
36.00
21.00
Total standard variable cost per unit
$112.00
The company also established the following cost formulas for its selling expenses:
Variable Cost
per Unit Sold
Fixed Cost
Advertising
Sales salaries and commissions
Shipping expenses
per Month
$ 280,000
$ 260,000
$ 20.00
$ 11.00
The planning budget for March was based on producing and selling 21,000 units. However, during March the company
actually produced and sold 26,600 units and incurred the following costs:
a. Purchased 154,000 pounds of raw materials at a cost of $9.50 per pound. All of this material was used in production.
b. Direct-laborers worked 63,000 hours at a rate of $13.00 per hour.
c. Total variable manufacturing overhead for the month was $510,930.
d. Total advertising, sales salaries and commissions, and shipping expenses were $286,000, $495,000, and $195,000,
respectively.
Required:
1. What raw materials cost would be included in the company's flexible budget for March?
Raw material cost](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd698fd8b-6b78-4374-91d0-94578dfadfc2%2F7171a6b1-ed47-446b-887d-d3ded6e142a9%2Fci9cwrw_processed.jpeg&w=3840&q=75)
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