A question which contain almost all budget problems also known as master budget. People often can not find master Budget Problems on internet easily.

1. Master Budget Question
Umbrella Corporation manufactures and sells wooden chairs that has peak sales in the
second quarter. The following data is given for year 2-the coming year- and for the first
two quarters of year 3
The price of single unit is 90$ and budgeted sales in units are given below:
Year 2 Quarter year 3 Quarter
1 2 3 4 1 2
4700 5000 3900 4200 4000 4900
The balance sheet on January 1, year 2 showed an account receivable of 72000 sales are
collected in following pattern 60% in first quarter and and 40% in next (second) quarter.
 Prepare a sales budget and scheduled of expected cash collections.
The company desires an ending inventory at the end of the budgeted unit sales of
next quarter. On December 31, year 1 the company had 700 units on hand.
 Prepare a production budget.
Each unit requires 5 pound of raw material that costs 2$ per pound. Management
requires ending raw material inventory at the end of each quarter equal to 40% of
following quarter production needs. On December 31, year 2, the company had 4000
units on hand.
 Prepare a direct material budget.
On January 1, year 3, the company balance sheet showed 50000 of account payable
which will be paid in the first quarter of the year. Management plans to pay 80% of the
raw material purchases in the quarter acquired and 20% in the following quarter.
 Prepare a schedule of expected cash payments.
Each unit requires 0.5 direct labour-hour and workers are paid 1.4$ per hour.
 Prepare a direct labour budget.
The company’s variable manufacturing overhead is 4$ per direct labour hour. The
company’s fixed manufacturing overhead is 20000$ per quarter.

2.  Prepare a MOH budget.
 Prepare an ending finished goods inventory budget.
The variable selling and admin expense per unit are $6 per unit. The fixed selling and
admin expenses are 75000$ per quarter.
 Prepare a selling and admin expense budget.
The board of directors have approved dividends of 15000$ per quarter. The company
requires a minimum cash balance of 5000$ and may borrow the amount from a local
bank at quarterly interest of 20%. The company may borrow any amount at the
beginning of any quarter and may repay its loans at the end of any quarter. Interest
payments are due on any principle at the time it is repaid.
 Prepare a cash budget.
 Prepare a budgeted income statement.