Citricacid plc budgets during its first year of operations to produce and sell 38,160 litres of product per annum at a selling price of £10 per litre. Citricacid’s budgeted costs are as follows: £ per unit Variable production costs 3.54 Fixed production costs 1.04 Variable selling costs 2.50 In the first year the unit selling price was £10 per litre and the variable unit cost and expenditure on fixed production costs were also as budgeted. Actual sales volume was 38,400 litres and closing inventory was 960 litres. Using absorption costing Citricacid’s profit for the year was: a) £113,376 b) £112,378 c) £112,128 d) £110,880
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.
Citricacid plc budgets during its first year of operations to produce and sell 38,160 litres of product per annum at a selling price of £10 per litre.
Citricacid’s budgeted costs are as follows:
£ per unit Variable production costs 3.54 Fixed production costs 1.04 Variable selling costs 2.50
In the first year the unit selling price was £10 per litre and the variable unit cost and expenditure on fixed production costs were also as budgeted. Actual sales volume was 38,400 litres and closing inventory was 960 litres.
Using absorption costing Citricacid’s profit for the year was:
a) £113,376
b) £112,378
c) £112,128
d) £110,880
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