Discussions

1. When should a company prepare budgets? What are the advantages of preparing budgets?

2. Why are human factors crucial in budgeting?

Exercises

1. Dubbo Pty Ltd manufactures and sells camping equipment. Included in the company's line of products are two type of backpacks, type A and type B. Sales of backpacks for the first quarter of the 2019-2020 financial year are budgeted as follows:

Sales in Units

A B

July 8000 15 000

August 9000 17 000

September 6000 12 000

Type A backpack sells for $15 and type B sells for $10.

Required:

Prepare a monthly sales budget in dollars for this quarter.

2. Jacob Ladders has forecast 2019-2020 sales as follows

Quarter

1 2 3 4

Budget Sales (units) 8000 6000 12 000 10 000

Unit selling price is $10. Each quarter's ending inventory is to be 20% of the following quarter's budgeted sales.

Required:

Prepare the production budgets for the first three quarters of 2019-2020.