SABIC is preparing its master budget for the coming year 2023. Relevant data pertaining to its budgets are as follows: Sales: expected sales volume to be 4,000 units in the first quarter with 250-unit increases in each succeeding quarter. The sales price will be $60 per unit. Production: it needs an ending inventory of 20% of next quarter's budgeted sales volume. Direct material: The manufacture of each unit requires 3 pounds of raw materials, and the expected cost per pound is $3. SABIC maintains an ending inventory of raw materials equal to 10% of the next quarter's production requirements, and the desired ending direct materials amount is 1,050 pounds for the fourth quarter of 2023. Direct labor: At SABIC, two hours of direct labor are required to produce each unit of finished goods. The anticipated hourly wage rate is $9. Overhead 1. Variable costs: On the basis of the rates per direct labor hour, the variable overhead costs are indirect materials $1.00, indirect labor $1.40, utilities $0.40, and maintenance $0.20. Fixed costs: supervisors salaries $80,000, depreciation $16,000, tax and insurance $36,000, and maintenance $22,000. Selling and Administrative expenses: 1. Variable expenses: On the basis of the rates per unit of sales, the variable expenses are sales commission $1.50, and freight-out $2. Fixed expenses: sales salaries $60,000, depreciation $4,000, tax and insurance $6,000, and advertising $20,000. Interest and zakat: interest expense is expected to be $150, and income zakat is estimated to be $8.000. Instructions: 1. Prepare operating budgets by quarters for 2003. 2. Prepare budgeted income statement for the year 2023.
SABIC is preparing its master budget for the coming year 2023. Relevant data pertaining to its budgets are as follows: Sales: expected sales volume to be 4,000 units in the first quarter with 250-unit increases in each succeeding quarter. The sales price will be $60 per unit. Production: it needs an ending inventory of 20% of next quarter's budgeted sales volume. Direct material: The manufacture of each unit requires 3 pounds of raw materials, and the expected cost per pound is $3. SABIC maintains an ending inventory of raw materials equal to 10% of the next quarter's production requirements, and the desired ending direct materials amount is 1,050 pounds for the fourth quarter of 2023. Direct labor: At SABIC, two hours of direct labor are required to produce each unit of finished goods. The anticipated hourly wage rate is $9. Overhead 1. Variable costs: On the basis of the rates per direct labor hour, the variable overhead costs are indirect materials $1.00, indirect labor $1.40, utilities $0.40, and maintenance $0.20. Fixed costs: supervisors salaries $80,000, depreciation $16,000, tax and insurance $36,000, and maintenance $22,000. Selling and Administrative expenses: 1. Variable expenses: On the basis of the rates per unit of sales, the variable expenses are sales commission $1.50, and freight-out $2. Fixed expenses: sales salaries $60,000, depreciation $4,000, tax and insurance $6,000, and advertising $20,000. Interest and zakat: interest expense is expected to be $150, and income zakat is estimated to be $8.000. Instructions: 1. Prepare operating budgets by quarters for 2003. 2. Prepare budgeted income statement for the year 2023.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:SABIC is preparing its master budget for the coming year 2023. Relevant data pertaining to its
budgets are as follows:
◆Sales: expected sales volume to be 4,000 units in the first quarter with 250-unit increases in each
succeeding quarter. The sales price will be $60 per unit.
◆ Production: it needs an ending inventory of 20% of next quarter's budgeted sales volume.
◆ Direct material: The manufacture of each unit requires 3 pounds of raw materials, and the
expected cost per pound is $3. SABIC maintains an ending inventory of raw materials equal to
10% of the next quarter's production requirements, and the desired ending direct materials
amount is 1,050 pounds for the fourth quarter of 2023.
◆ Direct labor: At SABIC, two hours of direct labor are required to produce each unit of finished
goods. The anticipated hourly wage rate is $9.
Overhead:
1. Variable costs: On the basis of the rates per direct labor hour, the variable overhead costs
are indirect materials $1.00, indirect labor $1.40, utilities $0.40, and maintenance $0.20.
2. Fixed costs: supervisors salaries $80,000, depreciation $16,000, tax and insurance $36,000,
and maintenance $22,000.
Selling and Administrative expenses:
1. Variable expenses: On the basis of the rates per unit of sales, the variable expenses are sales
commission $1.50, and freight-out $2.
2. Fixed expenses: sales salaries $60,000, depreciation $4,000, tax and insurance $6,000, and
advertising $20.000
◆ Interest and zakat: interest expense is expected to be $150, and income zakat is estimated to be
$8.000.
Instructions:
1. Prepare operating budgets by quarters for 2023.
2. Prepare budgeted income statement for the year 2023.
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