Starts Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year: a. Estimated sales at $45 per unit: January 225,000 units February 350,000 units March 375,000 units April 375,000 units b. Estimated finished goods inventories: January 31 12,000 units Feb. 28 5% of next month’s sales March 31 5% of next month’s sales April 30 5% of next month’s sales c. Work in process inventories are estimated to be insignificant (zero). d. Estimated direct materials inventories: Jan. 31 20,000 pounds Feb. 28 35,000 pounds March 31 40,000 pounds April 30 45,000 pounds e. Manufacturing costs: Per Unit Direct materials (2.5 lbs. per unit × $3 per lb.) $ 7.50 Direct labor (0.6 hr. per unit × $22 per hr.) 13.20 Variable factory overhead ($5 per direct labor hour) 3.00 Fixed factory overhead ($1,100,000 per month allocated using 500,000 units) 2.20 Total per-unit manufacturing costs $25.90 Prepare the following budgets Sales Budget Production Budget Direct Materials Budget Direct Labor Budget Factory Overhead Budget Cost of Goods Sold Budget
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.
Starts Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year:
a. Estimated sales at $45 per unit:
| January | 225,000 | units |
| February | 350,000 | units |
| March | 375,000 | units |
| April | 375,000 | units |
b. Estimated finished goods inventories:
| January 31 |
12,000 |
units |
| Feb. 28 | 5% | of next month’s sales |
| March 31 | 5% | of next month’s sales |
| April 30 | 5% | of next month’s sales |
c. Work in process inventories are estimated to be insignificant (zero).
d. Estimated direct materials inventories:
| Jan. 31 |
20,000 |
pounds |
| Feb. 28 | 35,000 | pounds |
| March 31 | 40,000 | pounds |
| April 30 | 45,000 | pounds |
e.
| Per Unit | |
| Direct materials (2.5 lbs. per unit × $3 per lb.) | $ 7.50 |
|
Direct labor (0.6 hr. per unit × $22 per hr.) |
13.20 |
| Variable factory |
3.00 |
| Fixed factory overhead ($1,100,000 per month allocated using 500,000 units) | 2.20 |
| Total per-unit manufacturing costs | $25.90 |
Prepare the following budgets
Sales Budget
Production Budget
Direct Materials Budget
Direct Labor Budget
Factory Overhead Budget
Cost of Goods Sold Budget
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