A sales budget is given below for one of the products manufactured by N.Ltd .For six months ended 30th June 2021. Month Units January 60,000 February 105,000 March 180,000 April May June 120,000 90,000 75,000 The inventory of finished goods at the end of each month equal 20% at the next month’s sales On 1st Jan 2021, finished goods inventory totaled 12,000 units. Each unit of the product requires nine units of a specialized liquid known as HN-2, sometimes this extract is in short supply for this reason, the company has a policy of maintaining an inventory at the end of each month equal to 30%of next month’s production needed. This requirement was met on 1st Jan 2021. Required (i) Prepare a budget showing the quantity of NH-2 to be purchased each month from January, February and March and in total for the three months period (ii) What is the significance of budgeting in any business organization
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.
A sales budget is given below for one of the products manufactured by N.Ltd .For six
months ended 30th June 2021.
Month Units
January 60,000 February 105,000 March 180,000
April May June
120,000 90,000
75,000
The inventory of finished goods at the end of each month equal 20% at the next month’s sales
On 1st Jan 2021, finished goods inventory totaled 12,000 units. Each unit of the product requires nine units of a specialized liquid known as HN-2, sometimes this extract is in short supply for this reason, the company has a policy of maintaining an inventory at the end of each month equal to 30%of next month’s production needed. This requirement was met on 1st Jan 2021.
Required
(i) Prepare a budget showing the quantity of NH-2 to be purchased each month from January, February and March and in total for the three months period
(ii) What is the significance of budgeting in any business organization
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