SALE, PRODUCTION AND RAW MATERIAL PURCHASES BUDGETS ABC Corporation manufactures and sells two products. Thingone and Thingtwo. In July, 2019, Scarborough’s Budget Department gathered the following data in order to project sales and budget requirements for 2020: 2020 projected sales: Product Units Price Thingone 60,000 Rs. 70 Thingtwo 40,000 Rs. 100 2020 inventories (in units):
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
SALE, PRODUCTION AND RAW MATERIAL PURCHASES BUDGETS
ABC Corporation manufactures and sells two products. Thingone and Thingtwo. In July, 2019, Scarborough’s Budget Department gathered the following data in order to project sales and budget requirements for 2020:
2020 projected sales:
|
Product |
Units |
Price
|
|
Thingone |
60,000 |
Rs. 70 |
|
Thingtwo |
40,000 |
Rs. 100 |
2020 inventories (in units):
|
Product |
Expected January 1, 2020 |
Desired December 31, 2020 |
|
Thingone |
20,000 |
25,000 |
|
Thingtwo |
8,000 |
9,000 |
To produce one unit of Thingone and Thingtwo, the following raw materials are used:
|
Amount Used per Unit
|
||
|
Raw Material |
Thingone |
Thingtwo |
|
A |
4lbs. |
5 lbs. |
|
|
|
|
|
B |
2lbs |
3 lbs. |
|
C |
- |
1 unit |
Projected data for 2020 with respect to raw materials are as follows:
|
Raw Material |
Anticipated Purchase Price (Rs.)
|
Expected Inventories January 01, 2020 |
Desired Inventories December 31, 2020 |
|
A |
8 |
32,000 lbs. |
36,000 lbs. |
|
B |
5 |
29,000lbs |
32,000 lbs. |
|
C |
3 |
6,000 units |
7,000 units |
Required:
Based on the above projections and budget requirements for 2020 for Thingone and Thingtwo, prepare the following 2020 budgets:
- Sales Budget.
- Production Budget
- Raw materials purchases budget.
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