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Chapter 22: Q23E (page 1233)

Preparing an operating budget—sales and production budgets

Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $30. Lugo projects sales for April will be 2,000 packages, with sales increasing by 250 packages per month for May, June, and July. On April 1, Lugo has 325 packages on hand but desires to maintain an ending inventory of 20% of the next month’s sales. Prepare a sales budget and a production budget for Lugo for April, May, and June.

Short Answer

Expert verified

Answer

Budgeted tablets to be produced

2,125

2,300

2,550

2,800

Budgeted sales revenue

$60,000

$67,500

$75,000

$82,500

Step by step solution

01

Preparation of sales budget


April

May

June

July

No. of units to be sold

2,000

2,250

2,500

2,750

Selling price per unit

X $30

X $30

X $30

X $30

Budgeted sales revenue

$60,000

$67,500

$75,000

$82,500

02

Preparation of production budget


April

May

June

July

No. of units to be sold

2,000

2,250

2,500

2,750

Plus: Desired tablets in ending inventory

450

500

550

600

Total units needed

2,450

2,750

3,050

3,350

Less: Tablets in beginning inventory

325

450

500

550

Budgeted tablets to be produced

2,125

2,300

2,550

2,800

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Most popular questions from this chapter

Using sensitivity analysis Rucker Company prepared the following budgeted income statement for 2019:

Requirements

1. Prepare a budgeted income statement with columns for 700 units, 1,300 units, and 1,700 units sold.

2. How might managers use this type of budgeted income statement?

3. How might spreadsheet software such as Excel assist in this type of analysis?

In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.

What is the formula used to determine the amount of merchandise inventory to be purchased?

Question: List the four budgeting objectives.

What budgets are included in the financial budget for a merchandising company?
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