The Volt Battery Company has forecast its sales in units as follows: January 1,100 February 950 March 900 April 1,400 May 1,650 June 1,800 July 1,500 Volt Battery always keeps an ending inventory equal to 130 percent of the next month’s expected sales. The ending inventory for December (January’s beginning inventory) is 1,430 units, which is consistent with this policy. Materials cost $12 per unit and are paid for in the month after purchase. Labor cost is $5 per unit and is paid in the month the cost is incurred. Overhead costs are $7,500 per month. Interest of $8,300 is scheduled to be paid in March, and employee bonuses of $13,500 will be paid in June. a. Prepare a monthly production schedule for January through July. Volt Battery Company Production Schedule January February March April May June July Projected unit sales 1,100selected answer correct 950 900 1,400 1,650 1,800 Desired ending inventory 1,235selected answer correct 1,170 1,820 2,145 2,340 1,950 Total units required 2,335 2,120 2,720 3,545 3,990 3,750 Beginning inventory 1,430 1,235 1,170 1,820 2,145 2,340 Units to be produced 905 885 1,550 1,725 1,845 1,410 b. Prepare a monthly summary of cash payments for January through June. Volt Battery produced 900 units in December. Volt Battery Company Summary of Cash Payments December January February March April May June Units produced Material cost Labor cost Overhead cost Interest Employee bonuses Total cash payments $0 $0 $0 $0 $0 $0
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.
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The Volt Battery Company has
| January | 1,100 |
| February | 950 |
| March | 900 |
| April | 1,400 |
| May | 1,650 |
| June | 1,800 |
| July | 1,500 |
Volt Battery always keeps an ending inventory equal to 130 percent of the next month’s expected sales. The ending inventory for December (January’s beginning inventory) is 1,430 units, which is consistent with this policy.
Materials cost $12 per unit and are paid for in the month after purchase. Labor cost is $5 per unit and is paid in the month the cost is incurred. Overhead costs are $7,500 per month. Interest of $8,300 is scheduled to be paid in March, and employee bonuses of $13,500 will be paid in June.
a. Prepare a monthly production schedule for January through July.
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b. Prepare a monthly summary of cash payments for January through June. Volt Battery produced 900 units in December.
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The production schedule is used for determining the required production in any period by the company, and the make sure that the company has material available when required. The cash disbursement budget helps the companies in determining the cash expenses for a particular period.
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