Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2017 reveals the following. Fixed Budget Sales (7,000 units) $ 2,800,000 Cost of goods sold Direct materials $ 280,000 Direct labor 490,000 Production supplies 175,000 Plant manager salary 65,000 1,010,000 Gross profit 1,790,000 Selling expenses Sales commissions 140,000 Packaging 154,000 Advertising 125,000 419,000 Administrative expenses Administrative salaries 85,000 Depreciation—office equip. 35,000 Insurance 20,000 Office rent 36,000 176,000 Income from operations $ 1,195,000 Complete the following flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.
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.
Tempo Company’s fixed budget (based on sales of 7,000 units) for the first quarter of calendar year 2017 reveals the following.
| Fixed Budget | ||||||||
| Sales (7,000 units) | $ | 2,800,000 | ||||||
| Cost of goods sold | ||||||||
| Direct materials | $ | 280,000 | ||||||
| Direct labor | 490,000 | |||||||
| Production supplies | 175,000 | |||||||
| Plant manager salary | 65,000 | 1,010,000 | ||||||
| Gross profit | 1,790,000 | |||||||
| Selling expenses | ||||||||
| Sales commissions | 140,000 | |||||||
| Packaging | 154,000 | |||||||
| Advertising | 125,000 | 419,000 | ||||||
| Administrative expenses | ||||||||
| Administrative salaries | 85,000 | |||||||
| 35,000 | ||||||||
| Insurance | 20,000 | |||||||
| Office rent | 36,000 | 176,000 | ||||||
| Income from operations | $ | 1,195,000 | ||||||
Complete the following flexible budgets for sales volumes of 6,000, 7,000, and 8,000 units.
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