ABC Corporation makes products Alpha and Beta. Both products make use of the same equipment. The following was provided to you with regard to these products in preparation for its budget for next year. Peso per unit data Alpha Alpha Beta Beta At 10,000 units At 12,500 units At 5,000 units At 8,000 units Selling price 100 100 250 250 Less: Costs 70 62 230 170 Profit 30 38 20 80 Alpha Beta Expected market demand next year 10,000 units 6,000 units Required Machine hours per unit 2 3 Total available machine hours 20,000 What is the contribution margin of Alpha if ABC was able to optimize the use of the machine hours? How many units of Beta should be produced to maximize profits?
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.
ABC Corporation makes products Alpha and Beta. Both products make use of the same equipment. The following was provided to you with regard to these products in preparation for its budget for next year.
|
Peso per unit data |
Alpha |
Alpha |
Beta |
Beta |
|
|
At 10,000 units |
At 12,500 units |
At 5,000 units |
At 8,000 units |
|
Selling price |
100 |
100 |
250 |
250 |
|
Less: Costs |
70 |
62 |
230 |
170 |
|
Profit |
30 |
38 |
20 |
80 |
|
|
Alpha |
Beta |
|
Expected market demand next year |
10,000 units |
6,000 units |
|
Required Machine hours per unit |
2 |
3 |
|
Total available machine hours |
|
20,000 |
- What is the contribution margin of Alpha if ABC was able to optimize the use of the machine hours?
- How many units of Beta should be produced to maximize profits?
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