Essay Prepare a Master Budget

1241 Words Nov 22nd, 2012 5 Pages
Electra Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows:
January ……………… 20,000
February …………….. 25,000
March ……………….. 30,000
April ………………… 30,000
The following data pertain to production policies and manufacturing specifications followed by Electra:
a. Finished goods inventory on January 1 is 13,000 units. The desired ending inventory for each month is 70 percent of the next month’s sales.
b. The data on materials used are as follows:
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Inventory policy dictates that sufficient materials be on hand at the
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9. Schedule 9: Budgeted income statement

Sales (Schedule 1) $ 6,750,000 Less: Cost of goods sold (Schedule 8) 5,565,720 Gross margin $ 1,184,280 Less: Selling and administrative expense (Schedule 6) 416,250 Income before taxes $ 768,030

10. Schedule 10: Cash budget

January February March Total
Beg. balance $ 162,900 $ 33,800 $ 0 $ 162,900
Cash receipts 1,800,000 2,250,000 2,700,000 6,750,000 Cash available $ 1,962,900 $ 2,283,800 $ 2,700,000 $ 6,912,900
Less disbursements: Purchases $ 783,000 $ 899,000 $ 870,000 $2,552,000 DL payroll 735,000 855,000 900,000 2,490,000 Overhead* 296,100 327,300 339,000 962,400 Marketing & admin.* 115,000 133,750 152,500 401,250 Land 90,000 90,000 Total $ 1,929,100 $ 2,305,050 $ 2,261,500 $ 6,495,650
Ending balance $ 33,800 $ (21,250)

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