Question
Alpha company produces two products, X and Y, that are sold to retailers. The budgeted sales volumes for the next quarter are as follows: Product
Alpha company produces two products, X and Y, that are sold to retailers. The budgeted sales volumes for the next quarter are as follows:
Product | Unit |
X | 32000 |
Y | 56000 |
The inventory of finished goods is budgeted to increase by 1000 units of X and decrease by 2000 units of Y by the end of that quarter.
Materials A and B are used in production of both products. The quantities required of each material to produce one unit of the finished product and the purchase prices are shown in the table below:
A | B | |
X | 8kg | 4kg |
Y | 4kg | 3kg |
Purchase price per kg | $1.25 | $1.80 |
Budgeted Opening Inventory | 30000kg | 20000kg |
The company plans to hold inventory of raw materials at the end of the quarter equal to 5% of the quarter's material usage budget.
Required:
A) Prepare the following budgets for the quarter:
i) the production budget in units
ii) the material usage budget (in kg)
iii) the material purchases budget (in kg and $)
B) What is the Master Budget and why is it useful?
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