Pharoah Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 21%, 27%, 23%, and 29%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 15% higher than the budgeted sales for the first quarter of 2020. Production Management desires to maintain the ending finished goods inventories at 20% of the next quarter's budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter's production requirements. Assume the production requirements for first quarter of 2021 are 510,000 pounds. Prepare the sales, production, and direct materials budgets by quarters for 2020.
Pharoah Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 21%, 27%, 23%, and 29%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 15% higher than the budgeted sales for the first quarter of 2020. Production Management desires to maintain the ending finished goods inventories at 20% of the next quarter's budgeted sales volume. Direct materials. Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter's production requirements. Assume the production requirements for first quarter of 2021 are 510,000 pounds. Prepare the sales, production, and direct materials budgets by quarters for 2020.
Cornerstones of Cost Management (Cornerstones Series)
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Author:Don R. Hansen, Maryanne M. Mowen
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Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 11CE: Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted...
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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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Transcribed Image Text:Pharoah Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials
budgets are as follows.
Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 21%, 27%, 23%, and 29%, respectively. The sales
price is expected to be $38 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. Sales in the first
quarter of 2021 are expected to be 15% higher than the budgeted sales for the first quarter of 2020.
Production. Management desires to maintain the ending finished goods inventories at 20% of the next quarter's budgeted sales
volume.
Direct materials. Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw
materials inventories at 10% of the next quarter's production requirements. Assume the production requirements for first quarter"
of 2021 are 510,000 pounds.
Prepare the sales, production, and direct materials budgets by quarters for 2020.
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