Question

Q2. Define the master budget and use your own figures to prepare the following quarter budgets: (2.5 marks)

1- Sales budget

2- Production budget with ending inventory.

3- Raw material budget with ending inventory.

4- Direct labor budget

5- Manufacturing overhead budget.

note: post the solution not photo

Answer 1

Answer is given below

A Master budget is a budget which is aggregation of all the functional budgets given by different functions. For eg: Sales, manufacturing, Human resource, Administration etc It also involves preparing Budgeted cash flow to see financial planning and also Budgeted statement of cash flows Once all the budget are compiled a Budgeted Income Statement and Budgeted Balance Sheet is prepared at the organization level It is a useful budget for planning and control purpose ABC Limited assumption: FG inventory 40% of next sales Raw material inventory 30% of next month requirement Sales Budget April | 430 Budgeted Sales Budgeted Selling price Budgeted Sales (value) $20 May 480 $20 $9,600 June 580 $20 $11,600 Quarter 1,490 $20 $29,800 $8,600 2 Production budget with ending inventory April May June July August 555 605 222 Budgeted Sales Add: Closing inventory (40% of next month sales) Total Needs Less: Opening Inventory Production Budget Quarter 1,490 222 1,712 172 1,540 242 797 232 222 520 570 575 3 Raw material budget with ending inventory April May June 1 July Quarter 1,540 450 520 570 2,080 684 Production units Material needed per production unit ( feet of bamboo) Budgeted material needed for production Add: Closing inventory ( 30% of next month requirement) Total Needs Less: Opening Inventory Purchase Budget- Direct Material (Units) Purchase price Total Direct Material Purchase Budget (Value) 2,764 1,800 624 2,424 540 1,884 $2.00 $3,768 2,280 690 2,970 684 2,286 $2.00 $4,572) 6,160 690 6,850 540 6,310 624 2,140 $2.00 $4,280 $2.00 $12,620 4 Direct labor budget June Quarter 1,540 570 Budgeted Production Budgeted Direct labor hour Total Direct labor hours Direct labor hour rate Budgeted Direct labor cost 450 0.50 225 $13 $2,925 May 520 0.50 260 770 0.50 285 $13 $3,705 $13 $3,380 $10,010 5 Manufacturing overhead budget wdy June $171 $70 Variable Manufacturing Overhead - $0.30 per unit Fixed Manufacturing Overhead-Cash Total Manufacturing overhead in cash Depreciation Budgeted Total Manufacturing Overhead April $135 $70 $205 $3301 $535 May $156 $70 $226 $3301 $556 Quarter $462 $210 $672 $990 $1,662 $241 $330 $571