Answer To: Question 1 – What points need to be considered before preparing a budget? Question 2 – Some...
Khushboo answered on Apr 18 2021
Solution 1:
The budget is considered as the vital process for any organization. It helps the entity in making effective decisions which is fruitful for the organization. Hence for developing the sound budget the management should possess the clear knowledge of the concerned entity and its working condition and environment. There are various important factors that should be considered in preparing the budget which consists of sales or income, cost and expenses and the balances and fund available with the entity. Hence making the budget as the effective one the management should consider the past trends and should also be conducting the market research and review the economic condition.
Solution 2:
Since budget is the vital process in the entity and there are various merits and demerits associated with the budgets. The benefits include the increase chance of attainment of goals and objectives. It also helps in determining the strength and weaknesses of the entity and problem can be dealt with and avoiding the problems with the remedial action. It also helps in assisting in better allocation and understanding the responsibility of the staff. It also ensures better coordination in the activities and different departments of the entity. Besides this there are various demerits of the budget which includes the de motivation of the staff and employees as sometimes the unachieved targets are set and it leads to unnecessary additional work. Moreover there is lack of cooperation among the departments which leads to operational budget in conflict. It also leads to lower flexibility and variance analysis presented to the management too late to have any influence (Ashe-Edmunds, Sam 2019).
Solution 3:
1. Sales Budget for the month of May
Product and Area
Unit sales Volume
Unit selling price
Total sales
Backyard model
Sydney
3500
550
1,925,000
Hobart
2800
500
1,400,000
Perth
4000
600
2,400,000
Total
10300
5,725,000
Deluxe master model
Sydney
1800
1300
2,340,000
Hobart
1500
1200
1,800,000
Perth
2900
1500
4,350,000
Total
6200
8,490,000
Total sales
14,215,000
2. Production Budget for the month of May
Basic model
Deluxe model
Total
Budgeted sales unit
10300
6200
16500
Planned ending inventory
1200
500
1700
Less: Beginning inventory
-1500
-400
-1900
Planned Production
10000
6300
16300
3. Direct material purchase budget for the month of may
Grates
Stainless Steel
Burner assemblies
selves
Basic model
Planned production
10000
10000
10000
10000
Units required
2
25
1
2
Total material required in production (a)
20000
250000
10000
20000
Deluxe model
Planned production
6300
6300
6300
6300
Units required
6
65
4
3
Total material required in production
37800
409500
25200
18900
Total material required in production
57800
659500
35200
38900
add: closing material
800
1900
800
480
less: beginning material
1000
2500
600
400
Budgeted DM purchase
57600
658900
35400
38980
Purchase price
$15
$3
$72
$7
Budgeted DM Purchase in $
$864,000
$1,976,700
$2,548,800
$272,860
4. Direct labor budget for the month of May
Basic model
Prefabrication
Forming
Assembly
Planned production
10000
10000
10000
Direct labor hour per...