Schedule 6: Selling and Administrative Expense Budget Q1 Q2 Q3 Q4 Total Planned sales (units) x variable rate per unit Variable expenses Fixed expenses Total selling and administrative expenses Schedule 7: Ending Finished Goods Inventory Budget Unit cost computation: Direct materials (number of units of material/FG * cost per unit) Direct labor (number of units/FG* cost per unit) Overhead: Variable overhead (number of units * cost per unit) Fixed overhead (Total overhead /total units needed) Total cost per unit of finished goods Total finished goods ending inventory ( note: multiply total cost x units) Schedule 8: Cost of Goods Sold Budget Direct materials used (Schedule 3) Direct labor used (Schedule 4) Overhead (Schedule 5) Budgeted manufacturing costs Add: Beginning fiished goods inventory (Schedule 7) Cost of goods available for sale Less: Endig finished goods inventory (Schedule 7) Budgeted cost of goods sold Schedule 9: Cash Budget Q2 Q3 Q4 Total Beginning cash Collections: Credit sales: Current quarter Prior quarter Cash available Less disbursements Direct materials: Current quarter Prior quarter Direct labor Overhead Selling and admin. Dividends Equipment Total cash needs Ending cash
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.
Optima Company is a high-technology organization that produces a mass-storage system. The design of Optima's system is unique and represents a breakthrough in the industry. The units Optima produces combine positive features of both compact and hard disks. The company is completing its fifth year of operations and is preparing to build its
Fourth-quarter sales for 20X0 are 55,000 units.
Unit sales by quarter (for 20X1) are projected as follows:
| First quarter | 65,000 | ||
| Second quarter | 70,000 | ||
| Third quarter | 75,000 | ||
| Fourth quarter | 90,000 |
The selling price is $400 per unit. All sales are credit sales. Optima collects 85% of all sales within the quarter in which they are realized; the other 15% is collected in the following quarter. There are no bad debts.There is no beginning inventory of finished goods. Optima is planning the following ending finished goods inventories for each quarter:
| First quarter | 13,000 units | ||
| Second quarter | 15,000 units | ||
| Third quarter | 20,000 units | ||
| Fourth quarter | 10,000 units |
Each mass-storage unit uses 5 hours of direct labor and three units of direct materials. Laborers are paid $10 per hour, and one unit of direct materials costs $80.
There are 65,700 units of direct materials in beginning inventory as of January 1, 20X1. At the end of each quarter, Optima plans to have 30% of the direct materials needed for next quarter's unit sales. Optima will end the year with the same amount of direct materials found in this year's beginning inventory.
Optima buys direct materials on account. Half of the purchases are paid for in the quarter of acquisition, and the remaining half are paid for in the following quarter. Wages and salaries are paid on the 15th and 30th of each month.
Fixed
Variable overhead is budgeted at $6 per direct labor hour. All variable overhead expenses are paid for in the quarter incurred.
Fixed selling and administrative expenses total $250,000 per quarter, including $50,000 depreciation.
Variable selling and administrative expenses are budgeted at $10 per unit sold. All selling and administrative expenses are paid for in the quarter incurred.
The
| Assets | |||
| Cash | $ 250,000 | ||
| Direct materials inventory | 5,256,000 | ||
| 3,300,000 | |||
| Plant and equipment, net | 33,500,000 | ||
| Total assets | $42,306,000 |
| Liabilities and |
|||
| Accounts payable | $ 7,248,000* | ||
| Capital stock | 27,000,000 | ||
| 8,058,000 | |||
| Total liabilities and stockholders’ equity | $42,306,000 | ||
| * For purchase of direct materials only. |
Optima will pay quarterly dividends of $300,000. At the end of the fourth quarter, $2 million of equipment will be purchased.
*PLEASE COMPLETE PER THE TEMPLATE PROVIDED (:
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