*Three (3) kilos of materials are required per unit produced. Every kilo of material is $20. Raw material inventory must be equal to 30% of the next month's needs . Desired ending inventory for September is 25,200 kilos and beginning inventory was 20,700 kilos. *Each unit requires 0.60 hours of direct labor and the average wage rate is $16 per hour. *Variable overhead rate is $3.50 per direct labor hour. There is also a fixed overhead of $22,000 per month. *The company pays 3% commission on sales. *Company has a monthly fixed and selling expenses as follows: Rent-$6,000 ; Utilities-$1,200 ; Advertising-$400: Office Salaries-$35,000.
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.
MAXI Co. has the following information:
*Projected sales for four (4) months are as follows: July-20,000 units; August -35,000 units ; September-25,000; October-30,000. Sales price per unit is $180
*Plans are to have a finished goods inventory end equal to 20% of the unit sales for next month. There was 4,000 units in beginning inventory on July 1.
*Three (3) kilos of materials are required per unit produced. Every kilo of material is $20. Raw material inventory must be equal to 30% of the next month's needs . Desired ending inventory for September is 25,200 kilos and beginning inventory was 20,700 kilos.
*Each unit requires 0.60 hours of direct labor and the average wage rate is $16 per hour.
*Variable
*The company pays 3% commission on sales.
*Company has a monthly fixed and selling expenses as follows: Rent-$6,000 ; Utilities-$1,200 ; Advertising-$400: Office Salaries-$35,000.
*Income tax rate at 35%
Requirement: Prepare the operating budget and the necessary schedule for the 3rd quarter.
7.Projected Cost of Goods Sold
8.Selling and Administrative Expense
9.Projected Income Statement
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