Chow Corporation manufactures children's chairs made of PVC plastic tubing and heavy canvas fabric material. Each chair requires eight feet of PVC tubing and three yards of material (heavy canvas fabric). Budgeted sales are 20,000 chairs for June, 25,000 chairs for July, and 30,000 chairs for August. Ending finished goods inventory (completed chairs) is budgeted at 10% of the current month's sales. Ending materials inventories ( PVC plastic tubing and canvas/fabric material) are budgeted at 10% of the current month's production. Prepare a production budget for each of June, July, and August. Assume the beginning inventory of chairs in June will be 2,500 units.
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.
Chow Corporation manufactures children's chairs made of PVC plastic tubing and heavy canvas fabric material.
- Each chair requires eight feet of PVC tubing and three yards of material (heavy canvas fabric).
- Budgeted sales are 20,000 chairs for June, 25,000 chairs for July, and 30,000 chairs for August.
- Ending finished goods inventory (completed chairs) is budgeted at 10% of the current month's sales.
- Ending materials inventories ( PVC plastic tubing and canvas/fabric material) are budgeted at 10% of the current month's production.
Prepare a production budget for each of June, July, and August. Assume the beginning inventory of chairs in June will be 2,500 units.
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