The managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control Maintenance Machining Assembly Total Budgeted overhead $374,000 $200,000 $392,000 $272,000 $1,238,000 costs before Allocation Budgeted machine – – 45,000 – 45,000 Hours Budgeted direct – – – 23,000 23,000 labour hours Budgeted hours – 5,000 15,000 5,000 25,000 of service: Quality Control Maintenance 8,000 – 14,400 9,600 32,000
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 managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information:
| Quality Control | Maintenance | Machining | Assembly | Total | ||||||
| Budgeted overhead | $374,000 | $200,000 | $392,000 | $272,000 | $1,238,000 | |||||
| costs before | ||||||||||
| Allocation | ||||||||||
| Budgeted machine | – | – | 45,000 | – | 45,000 | |||||
| Hours | ||||||||||
| Budgeted direct | – | – | – | 23,000 | 23,000 | |||||
| labour hours | ||||||||||
| Budgeted hours | – | 5,000 | 15,000 | 5,000 | 25,000 | |||||
| of service: Quality | ||||||||||
| Control | ||||||||||
| Maintenance | 8,000 | – | 14,400 | 9,600 | 32,000 |
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