EC 5 Q2 Hurtt’s Java Seeds is an independent roaster of specialty coffee beans. The company budgets 2 months ahead, so that in early January, it is time to plan for March. During March, the company plans to sell 20,000 pounds of beans. At the end of February, the company expects to have 3,000 pounds of raw green coffee beans (costing $8,000) and 800 pounds of roasted beans (costing $4,200) in inventory. Hurtt’s would like to have 1,400 pounds of green coffee beans and 500 pounds of roasted beans in inventory at the end of March. Hurtt’s purchases green coffee beans from the grower at $3 per pound and sells the roasted beans for $16 per pound. Hurtt’s roasters hold 25 pounds of green coffee beans. It takes 18 minutes to roast the beans to perfection. Because the roaster must be monitored by an employee at all times, each batch requires 0.33 direct labor hours. During the roasting process, the green beans lose 25% of their weight, so that 1.25 pounds of green (raw) beans must be used to produce 1 pound of roasted beans. The standard direct labor rate is $15 per direct labor hour. Variable overhead is applied at the rate of $85 per direct labor hour, and fixed overhead is budgeted at $13,099 per month, including $1,550 in equipment depreciation.
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.
EC 5 Q2
Hurtt’s Java Seeds is an independent roaster of specialty coffee beans. The company budgets 2 months ahead, so that in early January, it is time to plan for March. During March, the company plans to sell 20,000 pounds of beans. At the end of February, the company expects to have 3,000 pounds of raw green coffee beans (costing $8,000) and 800 pounds of roasted beans (costing $4,200) in inventory. Hurtt’s would like to have 1,400 pounds of green coffee beans and 500 pounds of roasted beans in inventory at the end of March. Hurtt’s purchases green coffee beans from the grower at $3 per pound and sells the roasted beans for $16 per pound.
Hurtt’s roasters hold 25 pounds of green coffee beans. It takes 18 minutes to roast the beans to perfection. Because the roaster must be monitored by an employee at all times, each batch requires 0.33 direct labor hours. During the roasting process, the green beans lose 25% of their weight, so that 1.25 pounds of green (raw) beans must be used to produce 1 pound of roasted beans. The standard direct labor rate is $15 per direct labor hour. Variable overhead is applied at the rate of $85 per direct labor hour, and fixed overhead is budgeted at $13,099 per month, including $1,550 in equipment
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