?Topic: Budget Planning

Develop an operating budget for a manufacturing company.

An operating budget provides the basis from which other budgets are constructed, such as the income statement and financial budgets. The operating budget starts with projecting sales for a future period, typically a year. Since all other information is based on the sales projection, it is critical that projected sales be as accurate as possible.

Operating Budget

Create an operating budget for the first quarter of a new business.
Projected Sales are:
Month #1: $65,000
Month #2: $97,500
Month #3: $130,000
Month #4: $100,019

These sales are based on selling one product with a selling price of $6.50

Create a Production Budget based on Units (not dollars).

• Desired Finished Goods Ending Inventory each month is 10% of the next month's projected sales

Create a Direct Materials Purchase Budget

• Each unit produced requires 10# of direct materials at a cost of $0.08 per pound.

• Desired Ending Direct Materials Inventory is 10% of the next month's material requirements.

Create a Direct Labor Budget

• Direct Labor Costs are $15/hour

• Each unit requires 5 minutes of labor

Create an Overhead Budget

• Variable Overhead Expenses are:

o Supplies ($.02 per unit)
o Inspection ($.10 per unit)
o Maintenance and Repair ($.03 per unit)
o Utilities ($.01 per unit)

• Fixed Overhead Expenses are $1100 monthly.

Create a Selling and Administrative Budget

• Variable Selling & Administrative Expenses are:

o Sales Commissions ($.03 per unit)
o Delivery ($.01 per unit)
o Office Support ($.02 per unit)

• Fixed Selling & Administrative Expenses are $2500 monthly.

Combine all Budgets to Create a Budgeted Income Statement

Complete a Budgeted Income Statement for months 1 through 3, and a Budgeted Income Statement that reflects the total first quarter.

Attachment:- operating budget-template.rar