The Good as Old Company manufactures antique-looking oak rocking chairs. Budgeted sales for the first five months of the year are as follows: Budgeted Sales (Units) January 200 February 240 March 180 April 160 May 240 Each rocking chair requires 10 square feet of oak, at a cost of $20 per square foot. The company wants to maintain an inventory of chairs equal to 25% of the following month's sales. At the beginning of the year, 40 chairs are on hand. Assume the company maintains an inventory of oak equal to 10% of the next month's needs. At the beginning of the year, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet. Required: (use the spreadsheet below for both) Prepare a production budget, in units, for each of the first four months. Prepare a purchases budget, in dollars, for each of the first three months.
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 Good as Old Company manufactures antique-looking oak rocking chairs. Budgeted sales for the first five months of the year are as follows:
Budgeted Sales (Units)
January 200
February 240
March 180
April 160
May 240
Each rocking chair requires 10 square feet of oak, at a cost of $20 per square foot.
The company wants to maintain an inventory of chairs equal to 25% of the following month's sales. At the beginning of the year, 40 chairs are on hand.
Assume the company maintains an inventory of oak equal to 10% of the next month's needs. At the beginning of the year, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet.
Required: (use the spreadsheet below for both)
Prepare a production budget, in units, for each of the first four months.
Prepare a purchases budget, in dollars, for each of the first three months.
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