Preparation of Master Budget

1. Sales Forecast

Month	Last Year Sales (KG)	Forecasted Sales (KG)	Selling Price (Rs./KG)
April	80,000	120,000	140
May	100,000	150,000	140
June	60,000	100,000	120 (Rs. 20 dealer discount)
July*	—	60,000	—

June is a slack season. July data used for inventory planning.

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2. Production Policy

• Sales Forecast Variation: ±20%
• Inventory Policy: Maintain closing stock = 20% of next month’s forecasted sales.
• April Opening Stock: 0 KG
• July Forecast: 60,000 KG (used for June’s closing inventory)

Production Budget

Month	Sales (KG)	Closing Inventory (20% of Next Month)	Opening Inventory	Production Required (KG)
April	120,000	30,000 (May forecast)	0	150,000
May	150,000	20,000 (June forecast)	30,000	140,000
June	100,000	12,000 (July forecast)	20,000	92,000
Total	370,000	—	—	382,000

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3. Raw Material Planning

• Material Cost: 35% of selling price (~Rs. 50/kg)

• Materials Required:

  • Pigments: 0.66 KG/unit (Rs. 40/KG)
  • Additives: 0.1 KG/unit (Rs. 100/KG)
  • Solvents, Oils, Resins (Details mentioned)

Pigment Purchase Budget (30% buffer)

Month	Opening Stock	Required (Production x 0.66)	Closing Stock	To be Procured
April	25,000 KG	99,000 KG	27,720 KG	101,720 KG
May	27,720 KG	92,400 KG	18,216 KG	82,896 KG
June	18,216 KG	60,720 KG	13,860 KG	56,364 KG
Total	—	—	—	240,980 KG

• Total Pigment Cost: Rs. 96,39,200

Additives Purchase Budget (10% buffer)

• Total Required: 37,400 KG
• Rate: Rs. 100/KG
• Total Additive Cost: Rs. 37,40,000

Other Materials (Summarized):

• Total Raw Material Cost (Q1): Rs. 1,89,15,800

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4. Labour Budget

• Monthly Cost: Rs. 12,00,000 (fixed)
• Quarter Total: Rs. 36,00,000

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5. Manufacturing Expenses

Item	Variable Rate (Rs./KG)	Fixed/Month (Rs.)
Packing Material	0.50	2,00,000
Repairs	0.20
Freight	0.15
Stores	0.80

• Total Manufacturing Expenses (Q1): Rs. 12,30,300

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6. Selling & Distribution Budget

Item	Variable Rate (Rs./KG)	Fixed/Month (Rs.)
Advertisement	Rs. 8	4,00,000
Distribution	Rs. 3	—
Training Expenses	—	2,00,000
Dealers Rewards	—	5,00,000

• Total Selling & Distribution (Q1): Rs. 73,70,000

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7. Administrative Expenses (All fixed)

Expense Type	Total (Rs.)
Legal	1,20,000
Communication	1,20,000
Travel	6,00,000
Audit	90,000
Printing & Stationery	2,40,000
Other Admin Expenses	1,50,000
Miscellaneous	3,00,000
Total (Q1)	16,20,000

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8. Credit Policy & Discounts

• Sales Mix:

  • Cash Sales: 30%

  • Credit Sales: 70%

    • 30 Days Credit: 20%
    • 60 Days Credit: 50%

• Cash Discount (Early Payment):

  • 2% for 30-day credit customers
  • 4% for 60-day credit customers
  • 30% of credit customers avail discount

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9. Capital Expenditure (CapEx)

Month	CapEx (Rs.)
April	15,00,000
May	10,00,000
June	20,00,000
Total	45,00,000

• Note: All replaced equipment fully depreciated

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10. Depreciation Policy

• Manufacturing Assets: Rs. 187.5 lakhs at 10%
• SG&A Assets: Rs. 62.5 lakhs at 12%
• Method: Straight-line on opening balance only
• Total Depreciation (Q1): Rs. 6,56,250

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11. Cash Budget Summary

• Opening Cash: Rs. 30,00,000

• Minimum Cash Required: Rs. 15,00,000

• Surplus Investment: Excess after minimum cash retained

• Collection Efficiency (Rs. 100 Sales):

  • Collected in same month: Rs. 50.28
  • Collected next month: Rs. 14
  • After two months: Rs. 35
  • Discount Given: Rs. 0.72

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12. Income Statement Summary (Q1)

Particulars	Amount (Rs.)
Sales Revenue	4,98,00,000
Cost of Goods Sold (COGS)	2,41,00,000
Gross Profit	2,56,00,000
Selling & Distribution	73,70,000
Admin Expenses	16,20,000
Discount to Customers	3,58,000
Additional Depreciation	1,87,500
Net Profit (Before Tax)	1,64,38,353
Interest Income (Invested Cash)	1,00,501

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13. Budgeted Balance Sheet (End of Q1)

• Equity: No change
• Reserves: Increased by Rs. 1.64 crore
• Payables (June Purchase): Rs. 44,85,080
• Inventory: Raw Material + Finished Goods = Rs. 15,28,262
• Receivables: Rs. 1,32,00,000
• Cash Balance: Rs. 15,00,000
• Investments: Rs. 1,19,60,420
• Total Assets & Liabilities: Rs. 5,21,62,933 (Balanced)

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