Osborne Manufacturing produces self-watering planters for use in upscale retail establishments. Sales projections for the first five months of the upcoming year show the estimated unit sales of the planters each month to be as follows: Inventory at the start of the year was 850 planters. The desired inventory of planters at the end of each month in the upcoming year should be equal to 25% of the following month’s budgeted sales. Each planter requires three pounds of polypropylene (a type of plastic). The company wants to have 20% of the polypropylene required for next month’s production on hand at the end of each month. The polypropylene costs $0.20 per pound. Requirements Prepare a production budget for each month in the first quarter of the year, including production in units for each month and for the quarter. Prepare a direct materials budget for the polypropylene for each month in the first quarter of the year, including the pounds of polypropylene required and the total cost of the polypropylene to be purchased.
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.
Osborne Manufacturing produces self-watering planters for use in upscale retail establishments. Sales projections for the first five months of the upcoming year show the estimated unit sales of the planters each month to be as follows:
Inventory at the start of the year was 850 planters. The desired inventory of planters at the end of each month in the upcoming year should be equal to 25% of the following month’s budgeted sales. Each planter requires three pounds of polypropylene (a type of plastic). The company wants to have 20% of the polypropylene required for next month’s production on hand at the end of each month. The polypropylene costs $0.20 per pound.
Requirements
- Prepare a production budget for each month in the first quarter of the year, including production in units for each month and for the quarter.
- Prepare a direct materials budget for the polypropylene for each month in the first quarter of the year, including the pounds of polypropylene required and the total cost of the polypropylene to be purchased.
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