ompany as we know produces two (2) products, GK320 and GK340. The following sales forecast for both products was decided on for the financial year January 1, 2020 to December 31, 2020: Details Q1 Q2 Q3 Q4 Total GK320 6,500 5,200 5,500 4,000 21,200 GK340 4,800 4,600 4,500 3,700 17,600 Notes: (a) The company planned to sell both GK320 and GK340 for $50 each. (b) The sales for
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.
Jules company as we know produces two (2) products, GK320 and GK340. The following sales
|
Details |
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|
GK320 |
6,500 |
5,200 |
5,500 |
4,000 |
21,200 |
|
GK340 |
4,800 |
4,600 |
4,500 |
3,700 |
17,600 |
Notes:
(a) The company planned to sell both GK320 and GK340 for $50 each.
(b) The sales forecast for the first quarter of 2021 is 5,900 units of GK320 and 4,000 units of GK340.
(c) The closing stock level for both products at the end of each quarter is to be held at a level equal to twenty percent (20%) of the budgeted sales for the next quarter.
(d) At the start of 2020 there were in stock 1,200 units of GK320 and 950 units of GK320.
(e) To make one unit of GK320 four (4) units of raw material A are required, while six (6) units of raw material B are required to make one unit of GK340. The cost of raw material A is $20 per unit, while the cost of raw material B is $15 per unit.
(f) Closing raw material stocks in units in store at the end of each quarter is to be equivalent to twenty five percent (25%) of the forecasted sales for the preceding quarter. Budgeted sales for the last period of 2019 were: GK320, 5,000 units and GK340 2,500 units.
(g) At the start of 2020 there were 2,500 units of raw material A and 2,100 units of raw material B in store.
Required:
(c) The direct raw materials usage budget for both products for 2020.
(d) What is meant by a principal budget factor and explain why it must be identified.
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