1) What are the two categories of budgets which make up a master budget? 2) A co
ID: 2445500 • Letter: 1
Question
1) What are the two categories of budgets which make up a master budget?
2) A company has budgeted its 4th quarter 2015 sales as follows: October - 7000 units November - 7500 units December - 9000 units The company wishes to maintain a month end inventory which equals 20% of the following month's sales. Based on this, how many units should be produced in the month of October?
3) Once a production budget is prepared, which two budgets are prepared next?
4) In preparing a cash budget, a company needs to budget both its cash receipts and cash disbursements. In addition, it would include in the budget any _____________________?
5) a. In which budget would the production manager's salary be included?
b. In which budget would the accounting manager's salary be included?
6) In preparing a master budget for a merchandising business, a ______ budget is prepared in lieu of a ______ budget.
7) What would be used as the starting point in the preparation of a current year end budgeted balance sheet?
8) What is the very last of the operational budgets to be prepared?
Explanation / Answer
Answer: to the 1st 4 parts:
1. Master budget comprises of operational budget and financial budget.
2. No. of units to be produced = Budgeted Sales unit + Budgeted Closing units - Opening Units
October opening units = Septemeber closing units = October Sales * 20% = 7,000*20%= 1,400 units
Budgeted Closing units = November sales*20% = 7,500 units*20% = 1,500 units
No. of units to be produced in october = 7,000+1,500 - 1,400 = 7,100 units (ans)
3. After production budget is prepared then Raw material purchase budget and Direct labor budget is prepared.
4. It would include in the budget any financing requirements (Borrowing, repayments, interest payments).
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