Sales and Production Budgets

Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget:

Rumble Thunder
Estimated inventory (units), June 1 750 300
Desired inventory (units), June 30 500 250
Expected sales volume (units):
East Region 12,000 3,500
West Region 14,000 4,000
Unit sales price $160 $200
a. Prepare a sales budget.

SONIC INC.
Sales Budget
For the Month Ending June 30

Product and Area Unit
Sales
Volume Unit
Selling
Price
Total
Sales
Model Rumble:
East Region $ $
West Region
Total $
Model Thunder:
East Region $ $
West Region
Total $
Total revenue from sales $
b. Prepare a production budget.

SONIC INC.
Production Budget
For the Month Ending June 30
Units Model Rumble Units Model Thunder
Expected units to be sold
Total units required
Total units to be produced

Explanation:

Budgeting is the process of creating a spending plan. This helps you determine whether you will have enough to meet your financial commitments. It is the preparing a budget in order to organize future actions/ plans.

A sales budget is a projection of future sales and expected revenues.

The objective of a sales budget is to plan for and control the expenditure of resources. It is also to achieve the projections and objectives of made by the sales department in order to keep the entity as a profitable going concern.

Sonic Inc

Sales Budget

For the month ending June 30

Details  unit sales volumeunit selling price  Total sales

Model R:                       ($)        ($)

East region  12, 000    160  1, 920, 000

Wet region  14, 000    160  2, 240, 000

Total          26, 000      4, 160, 000  

Model T

East region  3, 500    200  700, 000

West region      4, 000    200  800, 000

Total          7, 500      1, 500, 000  

Total revenue from sales      5, 660, 000

A Production budget is prepared in order to show the quantities of units that need to be produced in order to meet the sales and inventory budget.

Sonic Inc

Production Budget

For the month ending June 30

       Units Model Rumble  Units Model Thunder

Expected units to be sold    26, 000    7, 500

Plus, desired at 30 June  500              250

Total units required    26, 500    7, 750

Less, estimated inventory on 1 June-750    -250

Total units to be produced  25, 750    7, 500

Answer and Explanation:

a. Prepare a sales budget.

                               Unit

                               Sales

                               Volume               Unit Selling priceTotal Sales

Model Rumble:    

East region            12000                       160                    1920000

West region             14000                        160                     2240000

Total                                                                        4160000

Model Thunder:    

East region               3500                        200                        700000

West region                4000                200                         800000

Total                                                                           1500000

Total revenue from sales                                            5660000

b. Prepare a production budget.

                                                Units Model RumbleUnits Model Thunder

Expected units to be sold  26000                          7500

Add: Desired ending inventory  500                           250

Total units required                 26500                          7750

Less: Beginning inventory         (750)                             (300)

Total units to be produced  25750                             7450

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