White Corporation’s budget calls for the following sales for next year: Quarter 1 105,500 units Quarter 3 71,900 units Quarter 2 88,000 units Quarter 4 103,600 units Each unit of the product requires 4 pounds of direct materials. The company’s policy is to begin each quarter with an inventory of product equal to 5% of that quarter’s estimated sales requirements and an inventory of direct materials equal to 20% of that quarter’s estimated direct materials requirements for production. Required: 1. Determine the production budget for the second quarter. 2. Determine the materials purchases budget for the second quarter.
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.
White Corporation’s budget calls for the following sales for next year:
| Quarter 1 | 105,500 | units | Quarter 3 | 71,900 | units |
| Quarter 2 | 88,000 | units | Quarter 4 | 103,600 | units |
Each unit of the product requires 4 pounds of direct materials. The company’s policy is to begin each quarter with an inventory of product equal to 5% of that quarter’s estimated sales requirements and an inventory of direct materials equal to 20% of that quarter’s estimated direct materials requirements for production.
Required:
1. Determine the production budget for the second quarter.
2. Determine the materials purchases budget for the second quarter.
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