Aggrava Limited is currently preparing budgets for September to December. Its estimated sales figures in units are as follows: September October November December Sales (units) 3,807 11,719 11,047 15,522 Inventories at 31 August totalled 16,016 units, and inventories are to be kept at a constant level for all months except December, when opening inventories on 1 December are to be increased to 24,764. Inventories will revert to the normal level on 31 December. Inventories will cost £2 per unit throughout the period, and suppliers allow Aggrava Ltd to pay in the month following an order. Other relevant information is that 5,843 units were bought in August. Requirement 1: Prepare Aggrava Ltd's inventories budget (in units) for September to December. Requirement 2: Prepare the information relevant to inventories purchases that would appear in the cash budget for the period. Requirement 1: Aggrava Ltd's inventories budget (in units) is as follows: (Fill in the relevant cells with its corresponding figures. Negative figures should be entered in brackets.) September October November December Opening inventories (A) Sales forecast (B) A - B = (C) Inventories purchase* (E - C) Closing inventories (E) * same as 'sales forecast' for each month except November and December, when inventories increase and then revert to normal. Requirement 2: Relevant information relating to inventories purchases for the cash budget is as follows: (Fill in the relevant cells with its corresponding figures.) August September October November December Inventories purchased (units) (A) Cost per unit (£) (B) 2 2 2 2 2 Cost of inventories bought (£) [A*B = (C)] Cash outflow (£)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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September
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October
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November
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December
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Sales (units)
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3,807
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11,719
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11,047
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15,522
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September
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October
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November
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December
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Opening inventories (A)
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Sales
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A - B = (C)
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Inventories purchase* (E - C)
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Closing inventories (E)
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August
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September
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October
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November
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December
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Inventories purchased (units) (A)
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Cost per unit (£) (B)
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2
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2
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2
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2
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2
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Cost of inventories bought (£) [A*B = (C)]
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