Sales and Production Budgets Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for $10. Projected sales of the two models for the coming four quarters are given below. Deluxe Standard First quarter 12,000 90,000 Second quarter 14,200 88,600 Third quarter 16,800 93,000 Fourth quarter 20,000 91,800 The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter’s sales for deluxes and 10 percent of next quarter’s sales for standards. Required: 1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.
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.
Sales and Production Budgets
Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for $10. Projected sales of the two models for the coming four quarters are given below.
| Deluxe | Standard | |
| First quarter | 12,000 | 90,000 |
| Second quarter | 14,200 | 88,600 |
| Third quarter | 16,800 | 93,000 |
| Fourth quarter | 20,000 | 91,800 |
The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter’s sales for deluxes and 10 percent of next quarter’s sales for standards.
Required:
1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period.
| Berring Company | |||||
| Sales Budget | |||||
| For the Year Ended December 31 | |||||
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Year | |
| Deluxe: | |||||
| Units | fill in the blank bdaa07005004fe6_1 | fill in the blank bdaa07005004fe6_2 | fill in the blank bdaa07005004fe6_3 | fill in the blank bdaa07005004fe6_4 | fill in the blank bdaa07005004fe6_5 |
| Unit price | $fill in the blank bdaa07005004fe6_6 | $fill in the blank bdaa07005004fe6_7 | $fill in the blank bdaa07005004fe6_8 | $fill in the blank bdaa07005004fe6_9 | $fill in the blank bdaa07005004fe6_10 |
| Sales | $fill in the blank bdaa07005004fe6_11 | $fill in the blank bdaa07005004fe6_12 | $fill in the blank bdaa07005004fe6_13 | $fill in the blank bdaa07005004fe6_14 | $fill in the blank bdaa07005004fe6_15 |
| Standard: | |||||
| Units | fill in the blank bdaa07005004fe6_16 | fill in the blank bdaa07005004fe6_17 | fill in the blank bdaa07005004fe6_18 | fill in the blank bdaa07005004fe6_19 | fill in the blank bdaa07005004fe6_20 |
| Unit price | $fill in the blank bdaa07005004fe6_21 | $fill in the blank bdaa07005004fe6_22 | $fill in the blank bdaa07005004fe6_23 | $fill in the blank bdaa07005004fe6_24 | $fill in the blank bdaa07005004fe6_25 |
| Sales | $fill in the blank bdaa07005004fe6_26 | $fill in the blank bdaa07005004fe6_27 | $fill in the blank bdaa07005004fe6_28 | $fill in the blank bdaa07005004fe6_29 | $fill in the blank bdaa07005004fe6_30 |
| Total Sales | $fill in the blank bdaa07005004fe6_31 | $fill in the blank bdaa07005004fe6_32 | $fill in the blank bdaa07005004fe6_33 | $fill in the blank bdaa07005004fe6_34 | $fill in the blank bdaa07005004fe6_35 |
2. Prepare a separate production budget for each product for each of the first three quarters of the year.
Production budget for deluxes:
| Berring Company | |||
| Production Budget for Deluxes | |||
| First Three Quarters of the Year | |||
| Quarter 1 | Quarter 2 | Quarter 3 | |
| Unit sales | fill in the blank 60ca8efcefc1042_1 | fill in the blank 60ca8efcefc1042_2 | fill in the blank 60ca8efcefc1042_3 |
| Desired ending inventory | fill in the blank 60ca8efcefc1042_5 | fill in the blank 60ca8efcefc1042_6 | fill in the blank 60ca8efcefc1042_7 |
| Total needed | fill in the blank 60ca8efcefc1042_8 | fill in the blank 60ca8efcefc1042_9 | fill in the blank 60ca8efcefc1042_10 |
| Less: Beginning inventory | fill in the blank 60ca8efcefc1042_12 | fill in the blank 60ca8efcefc1042_13 | fill in the blank 60ca8efcefc1042_14 |
| Units produced | fill in the blank 60ca8efcefc1042_15 | fill in the blank 60ca8efcefc1042_16 | fill in the blank 60ca8efcefc1042_17 |
Production budget for standards:
| Berring Company | |||
| Production Budget for Standards | |||
| First Three Quarters of the Year | |||
| Quarter 1 | Quarter 2 | Quarter 3 | |
| Unit sales | fill in the blank 631bbbf6a01501e_1 | fill in the blank 631bbbf6a01501e_2 | fill in the blank 631bbbf6a01501e_3 |
| Desired ending inventory | fill in the blank 631bbbf6a01501e_5 | fill in the blank 631bbbf6a01501e_6 | fill in the blank 631bbbf6a01501e_7 |
| Total needed | fill in the blank 631bbbf6a01501e_8 | fill in the blank 631bbbf6a01501e_9 | fill in the blank 631bbbf6a01501e_10 |
| Less: Beginning inventory | fill in the blank 631bbbf6a01501e_12 | fill in the blank 631bbbf6a01501e_13 | fill in the blank 631bbbf6a01501e_14 |
| Units produced | fill in the blank 631bbbf6a01501e_15 | fill in the blank 631bbbf6a01501e_16 | fill in the blank 631bbbf6a01501e_17 |
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