Phonia Phelps Company’s Semi-Annual Budget Essay

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Mar 4th, 2024

Introduction

The budget is a detailed plan on how to acquire and use finances among other resources over the production time stipulated (TM 9-2, 2010). Budget control plans established in the organization to help achieve set goals. It also helps to quantify an organization as a way of determining its financial feasibility. As a result, it helps in controlling costs, evaluating performances, and making future decisions.

We will write a custom essay on your topic a custom Essay on Phonia Phelps Company’s Semi-Annual Budget
808 writers online

Phonia Phelps Company is making a budget preparation for the semi-annual of the year ending 30 July. For the period, the company has budgeted follows.

Sales Budget in Dollars

The sales budget is a schedule showing sales expected for a given time in detail. It is a forecast of the company’s sales to customers at a given time.

MonthJanFebMarchAprilMayJune
Sales (case)500055006100680070007200

The company’s selling price is $250 per case. Therefore, the sales budget preparations are as below.

JanFebMarchAprilMayJune
Budget Sales (unit)500055006100680070007200
Sales per unit$250$250$250$250$250$250
Total$1,250,000$1,375,000$1,525,000$1,700,000$1,750,000$1,800,000

Production Budget in Units

Extra Information

In order for Phionia Phelps to meet the next month’s expected growth, the company’s desire is to maintain an inventory of 10% at the end of the month, which is equal to projected sales for the next month. Moreover, last year in December, the company had 500 (5000*10%) units on hand. With the above information, the production Budget is as below.
Production Budget=budget sales+ desired ending inventories – beginning inventories

JanFebMarchAprilMayJuneJuly
Budgeted sales5, 0005,5006,1006,8007,0007,2007,400
Desired ending inventory550610680700720740750
Total needs5,5506,1106,7807,5007,7207,9408,150
Beginning inventories500550610680700720740
Required production5,0505,5606,1706,8207,0207,2207,410

Direct Materials Purchase in Pounds

Direct materials purchase budget expresses quantities and costs estimated for the raw materials and other components needed to meet the output demand of the production budget.

Extra Information

During production, all ingredient inventories for production are maintained at 5% of the next month’s production needs without exceeding 1,000 pounds for any ingredient.

1 hour!
The minimum time our certified writers need to deliver a 100% original paper
JanFebMarchAprilMayJuneSemi-annual
Production units needed5,0505,5606,1706,8207,0207,22037,840
Raw material per unit (pounds)Lamb5555555
Rice10101010101010
Salmon2222222
Vitamins111111
Production needs per poundLamb25,25027,80030,85034,10035,10036,100189,200
Rice50,50055,60061,70068,20070,20072,200378,400
Salmon10,10011,12012,34013,64014,04014,44075,680
Vitamins5,0505,5606,1706,8207,0207,22037,840
Desired ending inventory added (pounds)Lamb1,0001,0001,0001,0001,0001,0001,000
Rice1,0001,0001,0001,0001,0001,0001,000
Salmon1,0001,0001,0001,0001,0001,0001,000
Vitamins1,0001,0001,0001,0001,0001,0001,000
Total need materials (pounds)Lamb26,25028,80031,85035,10036,10037,100190,200
Rice51,50056,60062,70069,20071,20073,200379,400
Salmon11,10012,12013,34014,64015,04015,44076,680
Vitamins6,0506,5607,1707,8208,0208,22038,840
Subtract beginning inventories4,5455,0045,5536,1386,3186,49834,056
Raw material purchased per poundLamb21,70523,79626,29728,96229,78230,602156,144
Rice46,95551,59657,14763,06264,88266,702345,344
Salmon6,5557,1167,7878,5028,7228,94242,624
Vitamins1,5051,5561,6171,6821,7021,7224,784

Direct Materials Purchase in Dollars

Additional Materials

ItemCost
Lamb$15.00
Rice$1.20
Salmon$24.00
Vitamin$45.00
Raw material purchased per poundLamb21,70523,79626,29728,96229,78230,602156,144
Rice46,95551,59657,14763,06264,88266,702345,344
Salmon6,5557,1167,7878,5028,7228,94242,624
Vitamin1,5051,5561,6171,6821,7021,7224,784
Cost of material (dollars)Lamb325,575356,940394,455434,430446,730459,0302,342,160
Rice56,34661,915.2068,576.4075,674.4077,858.4080,042.40414,412.80
Salmon157,320170,784186,888204,048209,328214,6081,022,976
Vitamin67,72570,02072,76575,69076,59077,490215,280

Direct Manufacturing Purchase Budget

Direct Manufacturing Labor Budget in Dollars

The manufacturing process requires labor to prepare ingredients at $18 and to cook and can the product at $24 per hour. In addition, the management of the firm is adjusting the workforce according to demands. Since processing one batch involves 1 hour and the batch produces 100 cases. Then, one case requires 0.01 hours.

JanFebMarchAprilMayJuneSemi-annual
Needed production5,0505,5606,1706,8207,0207,22037,840
Direct labor hours50.555.661.768.270.272.2378.4
Direct labor cost per hourIngredient preparing labor9091000.81110.61227.61263.61299.66,811.2
Canning & cooking labor1,2121,334.41,480.81,636.81,684.81732.89,081.6
Total direct labor cost2,1212,335.22,591.42,864.42,948.43,032.415,892.8

Manufacturing Overhead Budget

Extra Information

Manufacturing overhead is fixed at $6,000 and $15 per case.

JanFebMarchAprilMayJuneSemi annual
Direct labor budgeted hours50.555.661.768.270.272.2378.4
Variable manufacturing rate$15$15$15$15$15$15$15
Total variable manufacturing overhead757.5834925.51023105310835676
Fixed manufacturing overhead$6,000$6,000$6,000$6,000$6,000$6,000$6,000
Total manufacturing overhead$6,758$6,834$6,926$7,023$7,053$7,083$11,676

Business Viability

The production expense of the company in six months is $11,676. In case there is a $50,000 investment, the business plan remains viable since the production cost and total labor costs are low (TM 9-1, 2010). However, the direct purchase of raw materials is expensive than available cash. As a result, the business plan to be undertaken forces the investor to pursue other means of acquiring raw materials like credit (Accounting CPE, 2013).

Conclusion

The sales budget estimates the company sales. On the other hand, the production budget ensures the stock is maintained at economic levels. Direct material highlights the needed materials for optimum production, and labor budget shows the cost of optimum labor. Hence, these budgets can help to determine the feasibility of engaging in a certain business to reduce the chances of losses.

References

Accounting CPE (2013).Web.

TM 9-1 (2010). Agenda: Profile Planning (Budgeting).New York, NY: McGraw-Hill.

Remember! This is just a sample
You can get your custom paper by one of our expert writers
Print
Need an custom research paper on Phonia Phelps Company’s Semi-Annual Budget written from scratch by a professional specifically for you?
808 writers online
Cite This paper
Select a referencing style:

Reference

IvyPanda. (2024, March 4). Phonia Phelps Company's Semi-Annual Budget. https://ivypanda.com/essays/phonia-phelps-companys-semi-annual-budget/

Work Cited

"Phonia Phelps Company's Semi-Annual Budget." IvyPanda, 4 Mar. 2024, ivypanda.com/essays/phonia-phelps-companys-semi-annual-budget/.

References

IvyPanda. (2024) 'Phonia Phelps Company's Semi-Annual Budget'. 4 March.

References

IvyPanda. 2024. "Phonia Phelps Company's Semi-Annual Budget." March 4, 2024. https://ivypanda.com/essays/phonia-phelps-companys-semi-annual-budget/.

1. IvyPanda. "Phonia Phelps Company's Semi-Annual Budget." March 4, 2024. https://ivypanda.com/essays/phonia-phelps-companys-semi-annual-budget/.


Bibliography


IvyPanda. "Phonia Phelps Company's Semi-Annual Budget." March 4, 2024. https://ivypanda.com/essays/phonia-phelps-companys-semi-annual-budget/.

Powered by CiteTotal, free referencing generator
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Request the removal
More related papers
Cite
Print
1 / 1