WellWheats, Inc. produces breakfast cereal and sells each box, or unit, for $7. The company is projecting sales of 1,000 units for the month of March. There are 30 units in the beginning inventory. Each unit requires 20 ounces of raw materials and 0.20 direct labor hours to make. The company's policy is to keep ending finished goods inventory of 10% of the current month's sales. Selling and administrative expenses for the month have been budgeted at $2,000. Knowledge Check 02 Assume that the beginning raw materials inventory is 2,000 ounces. If the desired ending raw materials inventory is 20% of the current month's production needs, calculate the budgeted raw materials to be purchased. Knowledge Check 03 If the direct labor cost per hour is $0.75, calculate the budgeted direct labor cost for the month of March.
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 following information applies to the questions displayed
below.]
We discuss how to prepare the different component budgets of the
operating budget, including the sales, production, direct materials,
direct labor,
selling and administrative expense budgets. We also discuss how
to use information from all of these operating budgets to prepare a
budgeted income statement.
WellWheats, Inc. produces breakfast cereal and sells each box, or unit, for $7. The
company is projecting sales of 1,000 units for the month of March. There are 30
units in the beginning inventory. Each unit requires 20 ounces of raw materials and
0.20 direct labor hours to make. The company's policy is to keep ending finished
goods inventory of 10% of the current month's sales. Selling and administrative
expenses for the month have been budgeted at $2,000.
Knowledge Check 02
Assume that the beginning raw materials inventory is 2,000 ounces. If the desired
ending raw materials inventory is 20% of the current month's production needs,
calculate the budgeted raw materials to be purchased.
Knowledge Check 03
If the direct labor cost per hour is $0.75, calculate the budgeted direct labor cost for
the month of March.
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