Budgeted information for X Ltd for the following period, analyzed by product, is shown below: Product A Product B Product C Selling price per unit $11 $10.5 $8 Variable costs per unit $5.8 $6 $5.2 Attributable fixed costs $275000 $337000 $296000 Sales Units for Product A 394600, for Product B 591900 and for product C 315680, General fixed costs, which are apportioned to products as a percentage sale are budgeted at $1668000. Required: (1) Calculate the budgeted profit of X Ltd, and each of its products. (2) Recalculate the budgeted profit of X Ltd. On the assumption that product C is discontinued, with no effect on sales of the other two products. State and justify other assumptions made. (3) Additional advertising, to that included in the budget for product A, is being considered. Calculate the minimum extra sales units required of product A to cover additional advertising expenses of $80,000. Assume that all other existing fixed costs would remain unchanged
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.
Budgeted information for X Ltd for the following period, analyzed by product, is shown below:
Product A Product B Product C
Selling price per unit $11 $10.5 $8
Variable costs per unit $5.8 $6 $5.2
Attributable fixed costs $275000 $337000 $296000
Sales Units for Product A 394600, for Product B 591900 and for product C 315680,
General fixed costs, which are apportioned to products as a percentage sale are budgeted at $1668000.
Required: (1) Calculate the budgeted profit of X Ltd, and each of its products. (2) Recalculate the budgeted profit of X Ltd. On the assumption that product C is discontinued, with no effect on sales of the other two products. State and justify other assumptions made. (3) Additional advertising, to that included in the budget for product A, is being considered. Calculate the minimum extra sales units required of product A to cover additional advertising expenses of $80,000. Assume that all other existing fixed costs would remain unchanged. (4) Calculate the increase in sales volume of product B that is necessary in order to compensate for the effect on profit a 10% reduction in the selling price of the product. State clearly any assumptions made
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