Year 2 Quarter Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 40,000 60,000 100,000 50,000 70,000 80,000 • Selling price per unit $8 per unit • Accounts receivable, beginning balance $65,000 • Sales collected in the quarter sales are made 75% • Sales collected in the quarter after sales are made 25% • Desired ending finished goods inventory is 30% of the budgeted unit sales of the next quarter • Finished goods inventory, beginning 12,000 units • Raw materials required to produce one unit 5 pounds • Desired ending inventory of raw materials is 10% of the next quarter's production needs • Raw materials inventory, beginning 23,000 pounds • Raw material costs $0.80 per pound • Raw materials purchases are paid 60% in the quarter the purchases are made and 40% in the quarter following purchase • Accounts payable for raw materials, beginning balance $81,500
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.
Data | Year 2 Quarter | Year 3 Quarter | |||||
1 | 2 | 3 | 4 | 1 | 2 | ||
Budgeted unit sales | 40,000 | 60,000 | 100,000 | 50,000 | 70,000 | 80,000 | |
• Selling price per unit | $8 | per unit | |||||
• Accounts receivable, beginning balance | $65,000 | ||||||
• Sales collected in the quarter sales are made | 75% | ||||||
• Sales collected in the quarter after sales are made | 25% | ||||||
• Desired ending finished goods inventory is | 30% | of the budgeted unit sales of the next quarter | |||||
• Finished goods inventory, beginning | 12,000 | units | |||||
• Raw materials required to produce one unit | 5 | pounds | |||||
• Desired ending inventory of raw materials is | 10% | of the next quarter's production needs | |||||
• Raw materials inventory, beginning | 23,000 | pounds | |||||
• Raw material costs | $0.80 | per pound | |||||
• Raw materials purchases are paid | 60% | in the quarter the purchases are made | |||||
and | 40% | in the quarter following purchase | |||||
• Accounts payable for raw materials, beginning balance | $81,500 | ||||||
Enter a formula into each of the cells marked with a ? below | |||||||
Review Problem: Budget Schedules | |||||||
Construct the sales budget | Year 2 Quarter | Year 3 Quarter | |||||
1 | 2 | 3 | 4 | 1 | 2 | ||
Budgeted unit sales | ? | ? | ? | ? | ? | ? | |
Selling price per unit | ? | ? | ? | ? | ? | ? | |
Total sales | ? | ? | ? | ? | ? | ? | |
Construct the schedule of expected cash collections | Year 2 Quarter | ||||||
1 | 2 | 3 | 4 | Year | |||
Accounts receivable, beginning balance | ? | ? | |||||
First-quarter sales | ? | ? | ? | ||||
Second-quarter sales | ? | ? | ? | ||||
Third-quarter sales | ? | ? | ? | ||||
Fourth-quarter sales | ? | ? | |||||
Total cash collections | ? | ? | ? | ? | ? | ||
Construct the production budget | Year 2 Quarter | Year 3 Quarter | |||||
1 | 2 | 3 | 4 | Year | 1 | 2 | |
Budgeted unit sales | ? | ? | ? | ? | ? | ? | ? |
Add desired finished goods inventory | ? | ? | ? | ? | ? | ? | |
Total needs | ? | ? | ? | ? | ? | ? | |
Less beginning inventory | ? | ? | ? | ? | ? | ? | |
Required production | ? | ? | ? | ? | ? | ? | |
Construct the raw materials purchases budget | Year 2 Quarter | Year 3 Quarter | |||||
1 | 2 | 3 | 4 | Year | 1 | ||
Required production (units) | ? | ? | ? | ? | ? | ? | |
Raw materials required to produce one unit | ? | ? | ? | ? | ? | ? | |
Production needs (pounds) | ? | ? | ? | ? | ? | ? | |
Add desired ending inventory of raw materials (pounds) | ? | ? | ? | ? | ? | ||
Total needs (pounds) | ? | ? | ? | ? | ? | ||
Less beginning inventory of raw materials (pounds) | ? | ? | ? | ? | ? | ||
Raw materials to be purchased | ? | ? | ? | ? | ? | ||
Cost of raw materials per pound | ? | ? | ? | ? | ? | ||
Cost of raw materials to be purchased | ? | ? | ? | ? | ? | ||
Construct the schedule of expected cash payments | Year 2 Quarter | ||||||
1 | 2 | 3 | 4 | Year | |||
Accounts payable, beginning balance | ? | ? | |||||
First-quarter purchases | ? | ? | ? | ||||
Second-quarter purchases | ? | ? | ? | ||||
Third-quarter purchases | ? | ? | ? | ||||
Fourth-quarter purchases | ? | ? | |||||
Total cash disbursements | ? | ? | ? | ? | ? |
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