The Bottled Water Company's Comprehensive Master Budget

The Bottled Water Company's comprehensive master budget for year ending December 31st is broken down into seven individual budgets and a budget income statement. The budgets include Sales, Production, Direct Materials Purchase, Direct Labor, Overhead, Selling and Administrative Expenses, and Cost of Goods Manufactured. The Sales Budget provides a quarterly and total year macro view of units, price per unit, and total sales. The Sales Budget anticipates the sale of 175,000 units with a total sales figure of $175,000 for the year. Next, the Production Budget defines the quantity of units produced in order to achieve both sales and ending inventory requirements. The company's Production Budget indicates a production quantity requirement

In other words, how much inventory is needed and how much will it cost. For this company, the total annual cost for direct materials necessary to meet the predetermined 177,000 unit production requirements is $36,240. This is followed by the Direct Labor Budget, which summarizes direct labor hours and the related cost of those hours. Estimating direct labor hours allows manager to determine current and future manpower requirements. The Direct Labor Budget can also aid in employee benefit decisions as well as employee training requirements for the company. The total direct labor cost for the year is $1,416 based on 177 direct labor hours at $8 per hour. Additionally, the Overhead Budget provides a forecast of production costs, beyond, or excluding direct materials or direct labor. The Overhead Budget also "integrate[s] the overhead cost budgets developed by the managers of production and production-related departments" (Crosson & Needles, 2014, p. 208). It also categorizes overhead rates for future use (Crosson & Needles, 2014). These overhead costs include variable costs, such as factory supplies, employee benefits, inspections, maintenance and repair, and utilities. They also include fixed overhead costs. The total overhead budget for

Net income is determined using the total sales (revenue) from the sales budget in the amount of $175,000, then deducts the cost of goods sold (beginning inventory, cost of manufactured goods, cost of finished goods, and cost of ending inventory) which totals $59,832, to determine a gross margin of $115,168. Then, selling and administrative expenses are deducted to determine the total income from operations and the total income for operations is taxed at 30% leaving a net income of