Could someone please help me with creating a Master Budget INDUSTRIAL MANUFACTUR

Question

Could someone please help me with creating a Master Budget

INDUSTRIAL MANUFACTURING LTD Industrial Manufacturing Ltd is preparing its annual budget for the year ending 31 March 2017 Industrial Manufacturing Ltd produce a single product, a valve housing which the company labelled the ZK4X housing. This product is used by farmers in New Zealand. The company has currently captured 40% of the New Zealand market for this type of product. The production process involves the input of two major components of direct raw materials - Metal and Plastic. You are provided with the following information with which to prepare the company's master budget Statement of Financial Position as at 31 March 2016 (prepared on a variable costing contribution format) Current Assets Cash at Bank Accounts receivable (net) Inventory 9,200.00 95,890.00 - Metal (3,250kg x $8.60) 27,950.00 Plastic (650kg x $1.50) - ZK4X housing (390 units x $76) 975.00 2964000 58,565.00 Property Plant and Equipment Land Building less Accumulated Depreciation (2% pa straight line) Machinery and Equipment less Accumulated Depreciation (15% pa straight line) 300,000.00 17,400.00 150,000.00 24.600.00 100,000.00 282,600.00 125.400.00 508,000,00 671655.00 Total Assets Liabilities Accounts Payable Accrued administrative wages 39,675.00 800.00 40,475.00 Shareholders Funds Issued Capital Retained Earnings 400,000.00 231,180.00 631,180.00 Total Liabilities and Equity 671655.00 1 Sales The selling price is expected to remain at $107 per unit for the foreseeable future

Explanation / Answer

A master budget is a set of interconnected budgets of sales, production costs, purchases, incomes, etc. and it also includes pro forma financial statements. A budget is a plan of future financial transactions. A master budget serves as planning and control tool to the management since they can plan the business activities during the period on the basis of master budget. At the end of each period, actual results can be compared with the master budget and necessary control actions can be taken.

Master budget has the following two components - Operational & Finacial Budget.

For the given case Master Budget is given as follows :

A.Operational budget

Sales Budget

Production Budget:

# Closing stock taken as 155 of next quarters sales

Direct Material Purchases & labour Budget

Calculation example as follows

Steel = One unit of ZK4X *5kg of steel *8.6 per kg

Plastic = One unit of ZK4X *1kg of plastic *1 per kg

Labour= One unit of ZK4X *1.5 hr  *16$ per hour

Financilal Budget

a. Schedule of expected cash receipts from customers.

Cash payment to steel suppliers

Quarter Units Price per unit ($) Sales $ June'16 2600 107        278,200.00 Sep'16 3300 107        353,100.00 Dec'16 3700 107        395,900.00 Mar'17 4100 107        438,700.00 Jun'17 3800 107        406,600.00 TOTAL    1,872,500.00

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