Operating Budgets: HELP Complete all graphs shown.
Example: sworth Company sells two products, Product A and Product B Next year, Ellsworth expects to sell 2,500 units or Product A at $5 each and 10,000 or Product B at 4 each Develop a sales budget for Ellsworth Product A Product B Total 12,500 s4 x$4.20 Units x Price Sales Revenue $12,500 $40,000 $52,500 The average price shown under the Total column is the average price based on total sales revenue divided by total units The next budget to be developed is the production budget. This budget is based on units only - not dollars be inning inventory units. Suppose a comp any expected monthly sales in the first quarter or 10,000 12,000, and 13,000 units. Expected April sales are 13,500. The compar y policy s to have 10% or the next month's sales in ending inventory; it started the quarter with 1,600 units in inventory. The quarter's production budget would be the following: 2,500 $5 The production budget requires the budgeted unit sales, the desired ending inventory units, and the January Total Sales + Desired ending inventory Total units needed 10,000 1,200 11,200 1,600 9,600 12,000 1,300 13,300 1,200 12,100 13,000 1,350 14,350 1,300 13,050 35,000 3,850 38,850 4,100 34,750 Beginning inventory Units to be produced The desired ending inventory for February is equal to ten percent of March sales the sum of the ending inventories for the three months of the quarter How many production budgets are prepared? one for the year broken down into quarters The direct materials purchases budgets can be prepared after the production budgets are complete. There are as mary direct materials purchases budgets as there are types of different direct materials used in production The purchases budget requires the budgeted production in units, the desired ending inventory of direct materials in units, and the beginning inventory in units. Suppose a company expected monthly production in the first quarter of 9,600 units, 12,100 units, and 13,050 units. Each unit takes 2 pounds of Material A and 3 pounds of Material B, Company policy is that sufficient raw material should be in ending im entory to satisfy 20% or the next month's production needs. B in ing inventory for each material satisfied that requirement 3,840 pounds or Material A and 5,760 pounds of Material B). The direct materials purchases budgets for January and February are as follows: Purchases Budget for Material A The desired ending inventory for the total column for the first quarter is equal to January March Budgeted units produced x DM per unit produced DM needed for production + Desired ending inventory Total units needed 9,600 12,100 13,050 19,200 24,200 26,100 Beginning inventory Units to be purchased Purchases Budget for Material B January Budgeted units produced x DM per unit produced DM needed for production + Desired ending inventory Total units needed 9,600 12,100 13,050 28,800 36,300 39,150 Beginning inventory 5,760 Units to be purchased
