Assume Marcella and the board adopted the spreadsheet prepared to forecast operations at 890,000 units (see the spreadsheet provided with this case) as the budget for 2016. At the close of the first six months of 2016, Marcella and the board asked the accountant to prepare an income statement for the first six months of 2016 to show how well the actual data compare to the budgeted data. The board asked to see a concise presentation showing only totals for variable and fixed costs. The analysis presented in Exhibit 2 below was provided for the board. Hanson expects sales and fixed costs to occur uniformly throughout the year. Exhibit 2: Budget Analysis as of June 30, 2016 Budget Actual Variance Sales units 445,000 470,000 Sales $ 1,824,500 $ 1,880,000 $55,500 Variable costs $694,200 $ 742,600 ($48,400) Contribution margin $ 1,130,300 $ 1,137,400 $ 7,100 Fixed costs $ 1,054,400 $ 1,042,100 $ 12,300 Net income $ 75,900 $ 95,300 $19,400
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.
Assume Marcella and the board adopted the spreadsheet prepared to
Exhibit 2: Budget Analysis as of June 30, 2016
Budget Actual Variance
Sales units 445,000 470,000
Sales $ 1,824,500 $ 1,880,000 $55,500
Variable costs $694,200 $ 742,600 ($48,400)
Contribution margin $ 1,130,300 $ 1,137,400 $ 7,100
Fixed costs $ 1,054,400 $ 1,042,100 $ 12,300
Net income $ 75,900 $ 95,300 $19,400
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