Tokyo Division of Toy King manufactures “Togo Toy” and sells them in the Japanese market for P6,000 each. The following data are from the Tokyo Division’s 2018 budget: Variable Cost P3,800 per unit Fixed Overhead P6,080,000 Total Assets P12,500,000 Toy King has instructed the Tokyo Division to budget a rate of return on total assets (before taxes) of 20%. The Tokyo Division is considering adjustments in the budget to reach the desired 20% rate of return on total assets: a. How many units must be sold to obtain the desired return if no other part of the budget is changed? b. Suppose sales cannot be increased beyond 3,40
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 Tokyo Division of Toy King manufactures “Togo Toy” and sells them in the Japanese market for P6,000 each. The following data are from the Tokyo Division’s 2018 budget:
Variable Cost P3,800 per unit
Fixed
Total Assets P12,500,000
Toy King has instructed the Tokyo Division to budget a
The Tokyo Division is considering adjustments in the budget to reach the desired 20% rate of return on total assets:
a. How many units must be sold to obtain the desired return if no other part of the budget is changed?
b. Suppose sales cannot be increased beyond 3,400 units. How much must total assets be reduced to obtain the desired return? Assume that for every P1,000 decrease in total assets, fixed costs decrease by P100.
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