Prepare the Material Cost Budget of products of a Company
For a company along with many products, a periodic budget would be developed given as: Assume a firm has 3 products X001, X002 and X003 along with standard material costs of Shs.3.5, 7.25 and 1.50 respectively. The management intends to produce 5000 units, 1500 units and 2500 units of the three products respectively in the given period as like to achieve its target profits for the next period.
Required
Prepare the material cost budget for the company.
Solution
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Standard
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Planned
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Total
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Material cost
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Output
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Material Cost
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(Shs)
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(shs)
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Product X001
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3.50
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5000
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17,500
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|
Product X002
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7.25
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1500
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10,875
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|
Product X003
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1.50
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2500
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3,750
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|
|
Total Material Cost Budget:
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275,000
|
Another difference between budgets and standards in those budgets is revised regularly, generally on a quarterly, monthly or annually basis. Standards are merely revised when they are not appropriate for employ in the current operating conditions. Finally, standard costs and the different resulting from their analysis form part of the accounting double entry system, from that the final financial statements are prepared. On the other hand, budgets are merely memorandum figures and don't form part of the accounting double entry system.