Weather Change, Co. reports the following information from its sales budget: Budgeted sales (units) July 18,000 August 19,200 September 20,400 October 21,800 November 24,100 December 25,900 The budgeted sales price per unit is $72. The company desires each month’s ending finished goods inventory to equal 15% of the following month’s sales, and the company desires each month’s ending raw materials inventory to equal 25% of the following month’s budgeted production needs. Each unit of output requires 8 grams of materials and each gram of material costs $2.00. The firm budgets that each unit will take 2.5 hours to complete and the labor rate is $14.00 per DL hour. Variable factory overhead is estimated to be $3.00 per DL hour. There is no fixed factory OH. The budgeted variable selling, general, and administrative expenses are $2.00 per unit sold and the budgeted fixed selling, general, and administrative expenses are $89,450 total per month. Assume there is no interest expense and ignore any taxes. The budgeted net income for the month of October is: a. $204,850 b. $185,950 c. $133,780 d. $145,150 e. $161,250
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.
Weather Change, Co. reports the following information from its sales budget:
|
|
Budgeted sales (units) |
|
July |
18,000 |
|
August |
19,200 |
|
September |
20,400 |
|
October |
21,800 |
|
November |
24,100 |
|
December |
25,900 |
The budgeted sales price per unit is $72. The company desires each month’s ending finished goods inventory to equal 15% of the following month’s sales, and the company desires each month’s ending raw materials inventory to equal 25% of the following month’s budgeted production needs. Each unit of output requires 8 grams of materials and each gram of material costs $2.00. The firm budgets that each unit will take 2.5 hours to complete and the labor rate is $14.00 per DL hour. Variable factory overhead is estimated to be $3.00 per DL hour. There is no fixed factory OH. The budgeted variable selling, general, and administrative expenses are $2.00 per unit sold and the budgeted fixed selling, general, and administrative expenses are $89,450 total per month. Assume there is no interest expense and ignore any taxes. The budgeted net income for the month of October is:
| a. |
$204,850 |
|
| b. |
$185,950 |
|
| c. |
$133,780 |
|
| d. |
$145,150 |
|
| e. |
$161,250 |
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