QUESTION 7 BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets. The following budgeted information is available for the first three months of 2021. (i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be 24 000 units. It is anticipated that there will be a 5% increase in sales volume in every subsequent month up to April 2021. (ii.) The finished goods inventory level at the end of each month will be maintained at one-third of the expected sales volume in the following month. The inventory of finished goods at 31 December 2020 is expected to be 7500 units with a value of $242000. The finished goods inventory value at 31 March 2021 is expected to be $298000. (iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each month is expected to meet 20% of the production requirement of the following month. The inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The purchase price will remain at $1.50 per kilo. (iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing overhead is expected to be 50% of direct labor. REQUIRED (a) Prepare the sales budget for the period January to March 2021. State the units and revenue for each month. (b) Prepare the production budget for the period January to March 2021. State the units for each month. (c) Prepare the purchases budgets for the period January to March 2021. State the units and cost for each month.
QUESTION 7 BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets. The following budgeted information is available for the first three months of 2021. (i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be 24 000 units. It is anticipated that there will be a 5% increase in sales volume in every subsequent month up to April 2021. (ii.) The finished goods inventory level at the end of each month will be maintained at one-third of the expected sales volume in the following month. The inventory of finished goods at 31 December 2020 is expected to be 7500 units with a value of $242000. The finished goods inventory value at 31 March 2021 is expected to be $298000. (iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each month is expected to meet 20% of the production requirement of the following month. The inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The purchase price will remain at $1.50 per kilo. (iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing overhead is expected to be 50% of direct labor. REQUIRED (a) Prepare the sales budget for the period January to March 2021. State the units and revenue for each month. (b) Prepare the production budget for the period January to March 2021. State the units for each month. (c) Prepare the purchases budgets for the period January to March 2021. State the units and cost for each month.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
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Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 20E: Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc.,...
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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.
Question
Transcribed Image Text:QUESTION 7
BMW Limited manufactures a single product, Tune. The finance director prepares monthly budgets.
The following budgeted information is available for the first three months of 2021.
(i.) The selling price will be fixed at $60 per unit. In January 2021 sales are expected to be
24 000 units. It is anticipated that there will be a 5% increase in sales volume in every
subsequent month up to April 2021.
(ii.) The finished goods inventory level at the end of each month will be maintained at one-third of
the expected sales volume in the following month. The inventory of finished goods at
31 December 2020 is expected to be 7500 units with a value of $242000. The finished
goods inventory value at 31 March 2021 is expected to be $298000.
(iii) Each unit of Tune requires 10 kilos of raw material. The closing inventory of raw materials each
month is expected to meet 20% of the production requirement of the following month. The
inventory of raw materials at 31 December 2020 is expected to be 48000 kilos. The
purchase price will remain at $1.50 per kilo.
(iv)Direct labor for the first three months of 2021 is expected to be $850000. Manufacturing
overhead is expected to be 50% of direct labor.
REQUIRED
(a) Prepare the sales budget for the period January to March 2021. State the units and revenue
for each month.
(b) Prepare the production budget for the period January to March 2021. State the units for each
month.
(c) Prepare the purchases budgets for the period January to March 2021. State the units and
cost for each month.
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