Furniture Island manufactures customized dining tables and is in the process of preparing its budgets for the next quarter (April, May and June). To date the following budgeted information has been compiled for one of its popular products ‘Mode’: Mode Budgeted sales (units) April 3,000 May 5,500 June 3,500 July 4,000 Budgeted selling price per unit: £80 80% of sales are on credit. Credit terms are strictly 30 days. 1% of all sales will result in bad debt. Trade receivables outstanding on 31st March were £65,000 (which are all collectible in April). Material X (kilogrammes) 3 kg Material planner has provided the following information: Material X Mode Opening inventory (April) 1,000 kg 1,200 units Closing inventory (June) 1,800 kg x Purchase price (per kilogramme) £2.50 x [ACC2003/LAC2003] [Page 9 of 10] All purchases are paid in the same month to the supplier. Management have decided closing stock at the end of each month should be as follows: Raw materials: 10% of the next month’s usage Finished goods: 10% of the next month’s sales. Overheads Fixed overheads are estimated at £5,000 per month and are paid in the month they were incurred. £1,500 of this amount relates to depreciation. Insurance of £12,500 is due to be paid in April. Capital Expenditure April: Computer £148,000 May: Delivery van £280,000 June: Additional Delivery van £230,000 Corporation Tax of £35,900 is due to be paid in May The opening bank balance is £43,500 overdrawn. Required: a) Prepare the following budgets for April, May and June: (i) Sales Budget (ii)Production Budget in units (iii) Materials Purchases Budget
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.
Furniture Island manufactures customized dining tables and is
in the process of preparing its budgets for the next quarter (April,
May and June). To date the following budgeted information has
been compiled for one of its popular products ‘Mode’:
Mode
Budgeted sales (units)
April 3,000
May 5,500
June 3,500
July 4,000
Budgeted selling price per unit: £80
80% of sales are on credit. Credit terms are strictly 30 days. 1%
of all sales will result in
on 31st March were £65,000 (which are all collectible in April).
Material X (kilogrammes) 3 kg
Material planner has provided the following information:
Material X Mode
Opening inventory
(April)
1,000 kg 1,200 units
Closing inventory
(June)
1,800 kg x
Purchase price (per
kilogramme)
£2.50 x
[ACC2003/LAC2003]
[Page 9 of 10]
All purchases are paid in the same month to the supplier.
Management have decided closing stock at the end of each
month should be as follows:
Raw materials: 10% of the next month’s usage
Finished goods: 10% of the next month’s sales.
Overheads
Fixed overheads are estimated at £5,000 per month and are
paid in the month they were incurred. £1,500 of this amount
relates to
Insurance of £12,500 is due to be paid in April.
Capital Expenditure
April: Computer £148,000
May: Delivery van £280,000
June: Additional Delivery van £230,000
Corporation Tax of £35,900 is due to be paid in May
The opening bank balance is £43,500 overdrawn.
Required:
a) Prepare the following budgets for April, May and June:
(i) Sales Budget
(ii)Production Budget in units
(iii) Materials Purchases Budget
b) Prepare the
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