Question

Please explain the meaning of the following terms:

ØMaster budget.

ØSales budget.

ØProduction budget.

ØDirect materials budget.

ØDirect labour budget.

Please indicate whether the statement is True or False and justify your answer in case of “False”:

1.Sales budget provide a lot of information about labour hours required, labour rate and cost.

2.To prepare production budget, we need to consider the sales forecast and that is all.

3.In direct materials budget, the direct materials needs = direct materials to be purchased.

4.To calculate the labour hours required for a particular production period, we need to know exclusively the direct labour hours required per unit and the expected units in sales and that is all.

5.Labour rate per hours in direct labour budget = total direct wages/ 100.

6.In production labour budget, beginning inventory of Q3 is the same as ending inventory of Q1 as long as the beginning and ending inventory of Q2 are exactly the same.

Answer 1

1. False:- Sales budget Not provide a lot of information about labour hours required, labour rate and cost.It's Provided by Labour budget.

2. True:- To prepare production budget, we need to consider the sales forecast and that is all. Because The production budget calculates the number of units of products that must be manufactured, and is derived from a combination of the sales forecast and the planned amount of finished goods inventory to have on hand.

3. True:- The direct materials budget shows how much must be purchased of each raw material in order to meet the orders for that time period.

4. True:- To calculate the labour hours required for a particular production period, we need to know exclusively the direct labour hours required per unit and the expected units in sales and that is all.

5. False:- Labour rate per hours in direct labour budget = total direct wages/ Total Labour Hours.

6. False:- It's Absolutely Wrong because beginning inventory of Q3 is the same as ending inventory of Q2 and beginning inventory of Q2 is the same as ending inventory of Q1.