Unit Sales Dollar Sales ($) 36,000 January February 108,000 38,000 114,000 March 41,000 123,000 April 43,000 129,000
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.
Production Budget and Direct Materials Purchases Budgets
Peanut Land Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first 4 months of the year is as follows:
Company policy requires that ending inventories for each month be 25% of next month’s sales. At the beginning of January, the inventory of peanut butter is 9,300 jars. Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar set (a glass jar and lid). Company policy requires that ending inventories of raw materials for each month be 10% of the next month’s production needs. That policy was met on January
1.
Required:
1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total.
2. Prepare separate direct materials purchases budgets for jars and for peanuts for the months of January and February.
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