Budgeting: Budgeting is a management accounting process. Various activities are performed to prepare a budget. Under the process of budgeting, budgets are prepared which act as a tool for decision making. Budgets are used by the management for taking various vital decisions.
Budgeting is an important process for any business. It aids coordination amongst various departments of an entity. Budgeting is important for tracking and improving performance of an entity. Under the process of budgeting the first and foremost budget that is created is a sales budget.
In course of ordinary business, the process of budgeting includes:
• Estimating the future sales level
• Estimating the cash inflows and outflows in future
• Estimating the future day to day operations of the business entity
• Incorporating estimates made into the financial statements
Budget: A quantitative financial plan for a period of time. It is prepared for future accounting periods. A budget is revised and modified on regular basis based upon the actual circumstances.
Master Budget: The combination of all budgets at various functional level is known as master budget. Master budget is usually prepared for the entire year. A master budget forms to be a very important management tool as it is used for evaluating the performance of various responsibility centers.
Sales Budget: The most important component of a master budget. A sales budget estimates the sales for a defined period in units as well in value. A sales budget is prepared after considering various economic conditions, past performances, activity level, production capacity of the entity etc.
Direct material purchase budget: Direct material purchase budget considers the inventory in the beginning of the period and the inventory at the end of the period to calculate the amount of direct material purchases for production purpose.
Calculate the units of raw material needed to meet production as follows:
Calculate desired units of ending raw materials inventory and units of beginning raw materials inventory as follows:
Prepare direct materials budget as follows:
Thus, total cost of raw materials to be purchased for the year is $3,084,000.
Ans:Total cost of raw materials to be purchased for the year is $3,084,000.
Exercise 8-3 Direct Materials Budget [L 08-41 Four grams of musk oil are required for each...
exercise 8-3
Exercise 8-3 Direct Materials Budget [LO8-4) Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $160 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Second ThirdFourth 120,000 180,000 130,000 Year 3 First First 90,000 Budgeted production, in bottles...
Exercise 8-3 Direct Materials Budget [LO8-4] 16.66 points Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Second Third 124,000 184,000 First 94,000 eBook Year 3 First 104,000 Budgeted production, in...
Exercise 8-3 Direct Materials Budget (LO8-4] Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Budgeted production, in bottles First Second Third Yourth 74,000 104,000 164,000 116,000 Pirst 84,000 Musk oil has become...
Exercise 8-3 Direct Materials Budget [LO8-4) 3 Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $180 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Stoped Budgeted production, in bottles First 66,000 Second 96,000 Third 156,060 Fourth 106,000 Year First 76,eee Musk...
Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company In western Siberia. The cost of the musk oil is $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: First 94,000 Year 2 Second Third 124,00 184,80 Fourth 134,000 Year 3 First 104, Budgeted production, in bottles Musk oil has become so popular...
Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.80 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: First 94,000 Year 2 Second Third 124,000 184,000 Fourth 134,000 Year 3 First 104,000 Budgeted production, in bottles Musk oil has become so popular...
33 Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.90 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Year 3 Fourth First Second Third First 106,000 Eudgeted production, in bottles 96,000 126, 000 186,000 136, 000 Musk oil has...
Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.70 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Second Third 108,000 168,000 First 78,000 Budgeted production, in bottles Year 3 First 88,000 Fourth 118,000 Musk oil has become so popular...
Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $2.20 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Second Third 130,000 190,000 First 100,000 Budgeted production, in bottles Year 3 First 110,000 Fourth 140,000 Musk oil has become so popular...
Four grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $2.10 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: 2 Year 2 Year 3 First First 98,000 128,000 188,000 138,000 Second Third Fourth Budgeted production, in bottles 108,000 Musk oil has become so...