Reliance Company budgets sales at 2,000,000 and expects a net income before tax of 10% of sales. Expenses are estimated as follows: Selling - 15% of sales Administrative – 9% of sales Finance - 1% of sales Labor is expected to be 40% of the total manufacturing cost. Factory overhead is to be applied at 75% of direct labor cost. Inventories are to be as follows; Jan 1 Dec 31 Materials 250,000 200,000 300,000 Work in Process 320,000 Finished Goods 350,000 400,000 Cost of good sold and manufacturing cost will be:
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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