Soriano Company is preparing its master budget for 2021. Relevant data pertaining to its sales, production, and direct materials budgets are as follows: Sales: Sales for the year are expected to total 1,200,000 units. Quarterly sales are 20%, 25%, 30%, and 25% respectively. The sales price is expected to be $50 per unit for the first three quarters and $55 per unit beginning in the fourth quarter. Sales in the first quarter of 2022 are expected to be 10% higher than the budgeted sales for the first quarter of 2021. Production: Management desires to maintain ending finished goods inventories at 25% of next quarter’s budgeted sales volume. Direct materials: Each unit requires 3 pounds of raw materials at a cost of $5 per pound. Management desires to maintain raw materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2018 are 810,000 pounds. Direct materials: Soriano budgets 0.5 hours of direct labor per unit, labor costs at $15 per hour Manufacturing Overhead : Soriano Company expects variable costs to fluctuate with production volume on the basis of the following rates per direct labor hour : indirect material $8, indirect labor $4, utilities $3, maintenance $2. Soriano also recognizes annual fixed cost : Supervisor salaries $2.600.000, Depreciation $1.000.000, Property taxes & insurances $675.000, Maintenance $549.000. Selling and administrative expenses : variable expense rate per unit of sales are sales commissions $3 and freight out $2. Soriano also recognizes annual fixed cost : Advertising $2.000.000, Sales salaries $1.500.000, Office salaries $1.000.000, Depreciation $600.000, Property taxes & insurances $900.000. Prepare Operating Budget for 2021 Calculate the budgeted total unit cost Prepare the budgeted income statement for 2021.
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.
Soriano Company is preparing its
Sales: Sales for the year are expected to total 1,200,000 units. Quarterly sales are 20%, 25%, 30%, and 25% respectively. The sales price is expected to be $50 per unit for the first three quarters and $55 per unit beginning in the fourth quarter. Sales in the first quarter of 2022 are expected to be 10% higher than the budgeted sales for the first quarter of 2021.
Production: Management desires to maintain ending finished goods inventories at 25% of next quarter’s budgeted sales volume.
Direct materials: Each unit requires 3 pounds of raw materials at a cost of $5 per pound. Management desires to maintain raw materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2018 are 810,000 pounds.
Direct materials: Soriano budgets 0.5 hours of direct labor per unit, labor costs at $15 per hour
Manufacturing Overhead : Soriano Company expects variable costs to fluctuate with production volume on the basis of the following rates per direct labor hour : indirect material $8, indirect labor $4, utilities $3, maintenance $2. Soriano also recognizes annual fixed cost : Supervisor salaries $2.600.000,
Selling and administrative expenses : variable expense rate per unit of sales are sales commissions $3 and freight out $2. Soriano also recognizes annual fixed cost : Advertising $2.000.000, Sales salaries $1.500.000, Office salaries $1.000.000, Depreciation $600.000, Property taxes & insurances $900.000.
- Prepare Operating Budget for 2021
- Calculate the budgeted total unit cost
Prepare the
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