The Marketing Department of Gaeber Industries has submitted the following sales forecast for the upcoming fiscal year. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted sales (units) . . . . . . 8,000 7,000 6,000 7,000 The company expects to start the first quarter with 1,600 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,700 units. In addition, the beginning raw materials inventory for the first quarter is budgeted to be 3,120 kilograms and the beginning accounts payable for the first quarter is budgeted to be $14,820. Each unit requires two kilograms of raw material that costs $4 per kilogram. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 3,140 kilograms. Management plans to pay for 75% of raw material purchases in the quarter acquired and 25% in the following quarter. Required: Prepare the company’s production budget for the upcoming fiscal year. Prepare the company’s direct materials budget and schedule of expected cash disbursements for materials for the upcoming fiscal year.
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 Marketing Department of Gaeber Industries has submitted the following sales
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Budgeted sales (units) . . . . . . 8,000 7,000 6,000 7,000
The company expects to start the first quarter with 1,600 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,700 units.
In addition, the beginning raw materials inventory for the first quarter is budgeted to be 3,120 kilograms and the beginning accounts payable for the first quarter is budgeted to be $14,820.
Each unit requires two kilograms of raw material that costs $4 per kilogram. Management desires to end each quarter with an inventory of raw materials equal to 20% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 3,140 kilograms. Management plans to pay for 75% of raw material purchases in the quarter acquired and 25% in the following quarter.
Required:
- Prepare the company’s production budget for the upcoming fiscal year.
- Prepare the company’s direct materials budget and schedule of expected cash disbursements for materials for the upcoming fiscal year.
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