Kawaii Kayaks (KK) Richard Fiesel is preparing the 2021 budget for one of KK’s kayaks. Extensive meetings with members of the sales department and executive management team have resulted in the following unit sales projections for 2021. Quarter 1 1,200 kayaks Quarter 2 1,500 kayaks Quarter 3 750 kayaks Quarter 4 700 kayaks
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.
Kawaii Kayaks (KK)
Richard Fiesel is preparing the 2021 budget for one of KK’s kayaks. Extensive meetings with members of the sales department and executive management team have resulted in the following unit sales projections for 2021.
|
Quarter 1 |
1,200 kayaks |
|
Quarter 2 |
1,500 kayaks |
|
Quarter 3 |
750 kayaks |
|
Quarter 4 |
700 kayaks |
|
|
|
KK’s policy is to have finished goods ending inventory in a quarter equal to 20% of the next quarter's anticipated sales. Preliminary sales projections for 2022 are 1,100 units for the first quarter and 1,500 units for the second quarter. Ending inventory of finished goods at December 31, 2020, will be 200 kayaks.
Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2020, is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, KK does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.55 per pound, and the finishing kits cost $150 each. Production of a single kayak requires 3 hours of time by more experienced, type I employees and 4 hours of finishing time by type II employees. The type I employees are paid $20 per hour, and the type II employees are paid $15 per hour.
Selling and administrative expenses for this line are expected to be $50 per unit sold plus $7,300 per quarter. Manufacturing overhead is assigned at 150% of labor costs.
Using your sales pricing decision, prepare the following budgets (include quarterly and yearly totals):
Sales Budget,
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