Prepare a Production budget. !! QUESTION FOR EXPERTS: DOES THE PRODUCTION BUDGET N THE PICTURE LOOK CORRECT BASED ON THE ABOVE INFORMATION?
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.
1. The DecorIdeas Company manufactures hand-crafted natural wood display
cupboards. Currently the company makes only one size of display cupboard, which is
60-inch height, 48-inch width, and 19-inch depth; and has 6 shelves. The final
product consists of a routed, sanded, assembled, and stained oak wood cupboard.
Direct materials include oak shelving wood and hickory plywood backing board.
Other materials, such as wood screws, sand paper, stain, wood glue, and packaging,
are treated as indirect materials. DecorIdeas is preparing budgets for the fourth
quarter ending December 31, 2022.
For each requirement below prepare budgets by month for October, November, and
December, and a total budget for the quarter. The previous year’s sales (2021/22) for the corresponding period were:
October 2,000 display cupboards
November 2,800 display cupboards
December 4,000 display cupboards
January 4,400 display cupboards
February 3,600 display cupboards
The company expects the above volume of display cupboard sales to increase by 15%
for the period October 2022 – February 2023. The budgeted selling price for 2022 is
$785.00 per display cupboard. The company expects 5% of its sales to be cash
(COD) sales. The remaining 95% of sales will be made on credit.
The company desires to have finished goods inventory on hand at the end of each
month equal to 15 percent of the following month's budgeted unit sales. On
September 30, 2022, there were 450 display cupboards on hand. (Note, an estimate of
sales in January is required in order to complete the production budget for
December). Prepare a Production budget.
!! QUESTION FOR EXPERTS: DOES THE PRODUCTION BUDGET N THE PICTURE LOOK CORRECT BASED ON THE ABOVE INFORMATION?
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