Master Budget

Question 1
 Master Budget

2.4 Direct Materials Purchases Budget

The direct materials purchase budget depends on the units needed for production and the change in the
raw material inventories during the period. Begin with units to be produced, not sales units. Why?
Materials are purchased and used for production purposes, not to be sold.

The amount of direct materials to be purchased is calculated as follows:

Question 2
Trump Inc. produces trinkets. Each trinket requires 0.4 board feet of wood and 1.25 hours of direct
labor. Wood costs $1.40 per board foot. Trump pays it employees $18.00 per hour. Trump desires to
have 20% of the materials needed for production during the next month on hand at the end of each
month, and 15% of the number of trinkets to be sold the next month on hand at the end of each month.
Scheduled production in units are:

April 4,100
May 4,700
June 5,300
Prepare a materials purchases budget for May in good form. Calculate budgeted raw materials inventory
on the balance sheet at May 31.
 Master Budget

Question 3
 Master Budget

Question 4
The year 2018 is eventually coming to an end and in couple of weeks 2019 will start. House comforts is a
company based in Sukkur owned by two female business graduates Komal and Kainat. As a start-up
venture house comforts is manufacturing local house furniture which includes chairs, stools, single
seater sofa. It is also planning to produce high quality laptop leather bags for 1 st time in 2019. The
company in 2018 had policy of holding closing inventory equivalent to 10% of sales in next month but in
2019 it has revised its policy of holding closing inventory equivalent to 5% of next month’s sale. You are
their class mate and they have asked for your assistance in preparing budget for each activity and item.

Sales Schedule related to Quarter 1 of 2019 for all 4 category of products is as follows

Stools Sofa Chairs Leather Bags

January 4000 1500 2000 1100

February 6000 1800 2500 1300

March 7000 1900 3000 1400

Material consumption and labour details are mentioned below.

Each stool consumes 4 kgs of steel and 500 grams of plastic. A chair consumes 3.25 kg of plastic and half
meter of water proof fabric. Sofa is partially made of fabric and partial leather. 2.5 meter of leather and
1.75 meter of water proof fabric is used. The only uses 2 meter of pure leather to prepare. Metal costs
Rs 25/ kg, water proof fabric costs Rs 150/ meter, Plastic is Rs 20/ kg and leather is Rs 500/ kg.

Labour are paid Rs 40/hour. A stool is made in 25 minutes, sofa in 6 hours, chiar is made in 45 mins and
leather bag is made in 3.5 hours. Labour rate will increase in March to Rs 48/ hour. Variable production
overhead RS 20/hour and are calculated on basis of labour hours. In March the variable overhead is
reduced by Rs 3.

Prepare production budget, material usage budget and production cost budget