The Simmons Company finished their sales projections for the coming year. The company produces one product. Part of next year's sales projections are as follows. Projected Sales in Units July 125,000 August 145,000 September 139,000 October 155,000 November 180,000 The budget committee has also completed the following information on inventories. Raw Materials Ending Balance, June, 50,000 lbs Desired ending levels (monthly 10% of next month's production needs) Work-In-Progress None Finished Goods Inventory Ending Balance, June, 22,000 units Desired ending levels: 20% of next month's sales The Engineering Department has developed the following standards upon which the production budgets will be developed. Item Standard Material usage 3 pounds per unit Material price per pound $2.00 per pound Labor usage 0.5 hours per unit Labor rate $40 per hour Machine hours 2 machine hours per unit The Simmons Company uses a modified allocation method for allocating overhead costs. The rates that will be used in the coming year are as follows. Overhead Item Allocation Rate Utilities $0.70 per machine hour Inspection $10 per unit produced Factory supplies $4 per unit produced Depreciation $60,000 per month Supervision $25,000 per month Prepare the following production budgets for July, August, September, and for the quarter for the Simmons Company. Overhead Budget Manufactured Budget (for the quarter, quarter totals only)
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 Simmons Company finished their sales projections for the coming year. The company produces one product. Part of next year's sales projections are as follows.
Projected Sales in Units
| July | 125,000 |
| August | 145,000 |
| September | 139,000 |
| October | 155,000 |
| November | 180,000 |
The budget committee has also completed the following information on inventories.
Raw Materials
Ending Balance, June, 50,000 lbs
Desired ending levels (monthly 10% of next month's production needs)
Work-In-Progress
None
Finished Goods Inventory
Ending Balance, June, 22,000 units
Desired ending levels: 20% of next month's sales
The Engineering Department has developed the following standards upon which the production budgets will be developed.
| Item | Standard |
|---|---|
| Material usage | 3 pounds per unit |
| Material price per pound | $2.00 per pound |
| Labor usage | 0.5 hours per unit |
| Labor rate | $40 per hour |
| Machine hours | 2 machine hours per unit |
The Simmons Company uses a modified allocation method for allocating
| Overhead Item | Allocation Rate |
|---|---|
| Utilities | $0.70 per machine hour |
| Inspection | $10 per unit produced |
| Factory supplies | $4 per unit produced |
| $60,000 per month | |
| Supervision |
$25,000 per month |
Prepare the following production budgets for July, August, September, and for the quarter for the Simmons Company.
- Overhead Budget
- Manufactured Budget (for the quarter, quarter totals only)
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