MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $10 per pound and 0.8 direct labor hours at a rate of $14 per hour. Variable overhead is budgeted at a rate of $2 per direct labor hour. Budgeted fixed overhead is $12,000 per month. The company's policy is to end each month with direct materials inventory equal to 45% of the next month's direct materials requirement. At the end of August the company had 12,780 pounds of direct materials in inventory. The company's production budget reports the following. Production Budget Units to produce September 14,200 October 17,000 November 16,200 (1) Prepare direct materials budgets for September and October. (2) Prepare direct labor budgets for September and October. (3) Prepare factory overhead budgets for September and October.
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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