The following are the budgeted and the actual results for the month of April 2021 of Tommy Limited. Budgeted results Actual results Production and sales volume 25,000 units 28,500 units Selling price per unit $120.0 $115.0 Cost information: Direct materials per unit (variable) $27.0 $24.3 Direct labour per unit (variable) $16.0 $19.0 Production overhead (semi-variable) $285,000.0 $330,000 Sales commission expense per unit (variable) $12.0 $13.2 Administration overhead (fixed) $367,000.0 $382,000.0 Additional information relating to the budgeted results is as follows: (i) To encourage more sales, a 5% discount on selling price will be given when the sales volume reaches 27,500 units. (ii) The company can enjoy a 10% bulk purchase discount on all the material costs when the production volume exceeds 27,000 units. (iii) It is estimated that when the production volume increases to 29,000 units, the production overhead will amount $325,000. (iv) As an incentive to the salesmen, an extra sales commission of 10% per unit will be given to all the sales if the sales volume exceeds 28,000 units. Required: a) Prepare a flexible budget for 28,500 units and 29,000 units. b) Prepare a budgetary control statement (performance report) for 28,500 units, showing the columns: flexible budget, actual results and variances
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.
The following are the budgeted and the actual results for the month of April 2021 of Tommy Limited.
Budgeted results Actual results
Production and sales volume 25,000 units 28,500 units
Selling price per unit $120.0 $115.0
Cost information:
Direct materials per unit (variable) $27.0 $24.3
Direct labour per unit (variable) $16.0 $19.0
Production overhead (semi-variable) $285,000.0 $330,000
Sales commission expense per unit (variable) $12.0 $13.2
Administration overhead (fixed) $367,000.0 $382,000.0
Additional information relating to the budgeted results is as follows:
(i) To encourage more sales, a 5% discount on selling price will be given when the sales volume reaches 27,500 units.
(ii) The company can enjoy a 10% bulk purchase discount on all the material costs when the production volume exceeds 27,000 units.
(iii) It is estimated that when the production volume increases to 29,000 units, the production overhead will amount $325,000.
(iv) As an incentive to the salesmen, an extra sales commission of 10% per unit will be given to all the sales if the sales volume exceeds 28,000 units.
Required:
a) Prepare a flexible budget for 28,500 units and 29,000 units.
b) Prepare a budgetary control statement (performance report) for 28,500 units, showing the columns: flexible budget, actual results and variances
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