A manufacturing company, VMTC PLC, makes the product, blitz. Monthly sales for the first five months of 2022 have been estimated as: Month Units January 210 000 February 180 000 March 210 000 April 220 000 May 200 000 Additional Information: i. Actual units sold in 2021 November and December were 190 000 and 220 000, respectively. ii. One unit of blitz requires 2 kg of material at $3.50 per kg. iii. One unit of blitz requires half an hour of direct labour at a rate of $12 per hour. iv. Based on past experience, 60% of cash is received in the month of sale, 25% the following month, 10% two months after and 5% is usually irrecoverable. v. Selling price is $18 per unit. vi. The company intends to have finished stock at the end of each month equivalent to 15% of the following month’s budgeted sales. The policy regarding stock of raw materials is to have 25% of the following month’s production requirements. vii. Stocks at 2022 January 01 are estimated to be 22 000 units of finished goods and 104 000 kg of raw materials. Produce, for 2022 January, February and March: A. production budget in units. B. raw materials purchased budget. C. a direct labour budget. D. a cash collection schedule for sales.
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.
A manufacturing company, VMTC PLC, makes the product, blitz. Monthly sales for
the first five months of 2022 have been estimated as:
Month Units
January 210 000
February 180 000
March 210 000
April 220 000
May 200 000
Additional Information:
i. Actual units sold in 2021 November and December were 190 000 and 220 000,
respectively.
ii. One unit of blitz requires 2 kg of material at $3.50 per kg.
iii. One unit of blitz requires half an hour of direct labour at a rate of $12 per hour.
iv. Based on past experience, 60% of cash is received in the month of sale, 25% the
following month, 10% two months after and 5% is usually irrecoverable.
v. Selling price is $18 per unit.
vi. The company intends to have finished stock at the end of each month equivalent to
15% of the following month’s budgeted sales. The policy regarding stock of raw
materials is to have 25% of the following month’s production requirements.
vii. Stocks at 2022 January 01 are estimated to be 22 000 units of finished goods and 104
000 kg of raw materials.
Produce, for 2022 January, February and March:
A. production budget in units.
B. raw materials purchased budget.
C. a direct labour budget.
D. a cash collection schedule for sales.
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