Logan Future Factory is producing its cost of sales budget. Direct materials are budgeted to be 50% of sales value. However, due to the expansion of the company in the recent past, suppliers are giving Logan Future Factory a 5% discount on all purchases of direct materials by the firm. Budgeted sales for January 2023 are expected to be $500,000 and to rise by $50,000 a month in the budget year up to December 2023. Direct labour is expected to amount to 15% of sales value and variable overhead is budgeted to be 5% of direct labour cost. 1. What is the budgeted cost of sales (direct materials + direct labour + variable overhead) figure that will appear in the budgeted monthly statement of profit or loss for June 2023?
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.
Logan Future Factory is producing its cost of sales budget. Direct materials are budgeted to be 50% of sales value. However, due to the expansion of the company in the recent past, suppliers are giving Logan Future Factory a 5% discount on all purchases of direct materials by the firm. Budgeted sales for January 2023 are expected to be $500,000 and to rise by $50,000 a month in the budget year up to December 2023. Direct labour is expected to amount to 15% of sales value and variable overhead is budgeted to be 5% of direct labour cost.
1. What is the budgeted cost of sales (direct materials + direct labour + variable overhead) figure that will appear in the budgeted monthly statement of profit or loss for June 2023?
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