Managerial Accounting

No Plagiarism. 3-4 pages  Discussing the 2 following question below.

Chicago Furniture Company produces combination desk and chair sets for the elementary schools in the Midwest. As the second quarter is progressing it is important for the controller to complete a budget for the third quarter. The sales department manager has provided the following forecast.

   July                   8,000                   desk combos  

   August            8,700                  desk combos  

   September   7,600                  desk combos

   October         8,700                  desk combos  

   November    8,800                  desk combos 

• In order to ensure Just-in-Time (JIT) deliveries are maintained in accordance with the needs of the schools Chicago Furniture Company has a standing policy that the inventory at the end of each month must be equal to 40% of the following month’s forecasted sales. On July 1st there will be 3,200 desk combos in inventory.  
• The building of each desk combo requires 12 board feet of pine planks which cost $0.70 per foot. In order to maintain proper inventory for building the desk combos the department must have 30% of the next month’s production requirements.

Using the information you developed in Submission Lesson #1, write 3-4 pages discussing the following: 

• Why is the preparation of a sales forecast one of the earliest steps in preparing a master budget?  
• Explain at least three ways a company can benefit from preparing a formal budget.