Question

Chapter 8 Budgeting for Planning and Control sells for $40). OBJECTIVE 2 oming four quarters Exercise 8.16 Sales and Production Budgets Berring Company produces two products: the deluxe and the standard. The deluxe sells to and the standard sells for S10. Proiected sales of the two models for the coming four are given below. Standard Deluxe 90.000 12.000 First quarter 88.400 14,300 Second quarter 92,000 Third quarter 16.600 91,600 20,000 Fourth quarter The president of the company believes that the projected sales are realistic and can achieved by the company. In the factory, the production supervisor hasceived the pro sales figures and gathered information needed to compile production gets. He found the 1,300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter's sales for deluxes and 10 percent of next quarter's sales for standards. Required: 1. Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period. 2. What factors might Berring Company have considered in preparing the sales budget? 3. Prepare a separate production budget for each product for each of the first three quarters of the year.

Answer 1

B2 AB C D E F G H first quarter Sales Budget second quarter third quarter fourth quarter year 62,900 Deluxe sales units selling price per unit total sales (dollars) 12,000 $ 40 $ 480,000 14,300 $ 40 $ 572,000 16,600 $ 40 $ 664,000 20,000 $40 $800,000 $2,516,000 Sales Budget first quarter second quarter third quarter fourth quarter year Standard sales units selling price per unit total sales (dollars) 90,000 $ 10 $ 900,000 88,400 $ 10 $ 884,000 92,000 $10 $920,000 91,600 $ 10 $916,000 362,000 $ 10 $3,620,000 |Factors might berring have company considered in preparing the sales budget - | i) The price set be the competitors. ii) The customers' response towards the products. iii) The profit per unit of each product. iv) The goodwill of the Company in the market.

B22 - X Fox 3 AB C D E F H Production Budget first quarter second quarter third quarter Deluxe sales units 12,000 14,300 16,600 add: desired ending inventory 2,860 3,320 4,000 total needs 14,860 17,620 20,600 less: beginning inventory 1,300 2,860 3,320 units to be produced 13,560 14,760 17,280 Production Budget first quarter second quarter third quarter Standard sales units 90,000 88,400 92,000 add: desired ending inventory 8,840 9,200 9,160 total needs 98,840 97,600 101,160 less: beginning inventory 1,170 8,840 9,200 units to be produced 97,670 88,760 91,960

for formulas and calculations, refer to the image below -

B2 1 x fc 1 D E F G H I Sales Budget first quarter second quarter third quarter fourth quarter year 12000 Deluxe sales units selling price per unit total sales (dollars) 14300 40 =E5*E6 16600 40 =F5*F6 20000 40 =G5*G6 =SUM(D5:45) =G6 =H5*H6 =D5*D6 Sales Budget first quarter second quarter third quarter fourth quarter Standard sales units selling price per unit total sales (dollars) 90000 10 =D12*D13 88400 10 =E12*E13 92000 10 =F12*F13 91600 10 =G12*G13 =SUM(D12:G12) =G13 =H12*H13 12 þctors might berring have company considered in preparing the sales budget| i) The price set be the competitors. 11) The customers' response towards the products. iii) The profit per unit of each product. iv) The goodwill of the Company in the market.

B22 Production Budget first quarter second quarter third quarter Deluxe sales units 12000 14300 16600 add: desired ending inventory =E25*20% =F25*20% =G5*20% total needs =D25+D26 =E25+E26 =F25+F26 less: beginning inventory 1300 =D26 =E26 units to be produced =D27-D28 =E27-E28 =F27-F28 Production Budget first quarter second quarter third quarter Standard sales units =D12 =E12 =F12 add: desired ending inventory =E34*10% =F34*10% =G12*10% total needs =D34+D35 =E34+E35 =F34+F35 less: beginning inventory 1170 =D35 =E35 units to be produced =D36-D37 =E36-E37 =F36-F37

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