The Caribbean Industrial Producers manufactures two products, “Zinc” and” “Ply”. The following sales forecast for 2016 was decided on by the budget committee and presented to you the management accountant. Sales forecast Details Zinc/units Ply /units November 2015 3,200 3,000 December 2015 6,000 3,700 January 2016 5,500 4,000 February 2016 6,200 4,500 March 2016 5,000 5,400 April 2016 4,900 5,200 May 2016 6,400 4,800 Notes: (i) During 2016 the company sold one unit of Zinc for $1,200 while one unit of Ply was sold for $$1,500. (ii) To make one unit of Zinc four units of raw material BZN980 are used, while two units of raw material CZN980 are used to produce one unit of Ply. . (iii) Raw materials stock in units at the end of each month is to be held at a level equal to twenty percent (20 %) of the forecasted sales for the previous month. (iv) It was decided by management that at the end of each month there should be enough finished goods stock on hand to meet fifteen (15%) of the sales for the next month. (v) During 2016, direct raw material charge per unit was budgeted at ten percent (10%) of the unit selling price of the finished products. Required: For the period, January 2016 to April 2016 do the following: The company’s sale budget. The production budget for both products. The direct raw materials usage budget for both products. The direct raw materials purchases budget. Briefly explain, using two examples what is meant by a “limiting budget factor”
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.
The Caribbean Industrial Producers manufactures two products, “Zinc” and” “Ply”. The following sales
Sales forecast
|
Details |
Zinc/units |
Ply /units |
|
November 2015 |
3,200 |
3,000 |
|
December 2015 |
6,000 |
3,700 |
|
January 2016 |
5,500 |
4,000 |
|
February 2016 |
6,200 |
4,500 |
|
March 2016 |
5,000 |
5,400 |
|
April 2016 |
4,900 |
5,200 |
|
May 2016 |
6,400 |
4,800 |
Notes:
(i) During 2016 the company sold one unit of Zinc for $1,200 while one unit of Ply was sold for $$1,500.
(ii) To make one unit of Zinc four units of raw material BZN980 are used, while two units of raw material CZN980 are used to produce one unit of Ply. .
(iii) Raw materials stock in units at the end of each month is to be held at a level equal to twenty percent (20 %) of the forecasted sales for the previous month.
(iv) It was decided by management that at the end of each month there should be enough finished goods stock on hand to meet fifteen (15%) of the sales for the next month.
(v) During 2016, direct raw material charge per unit was budgeted at ten percent (10%) of the unit selling price of the finished products.
Required:
For the period, January 2016 to April 2016 do the following:
- The company’s sale budget.
- The production budget for both products.
- The direct raw materials usage budget for both products.
- The direct raw materials purchases budget.
- Briefly explain, using two examples what is meant by a “limiting budget factor”
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