Wyoming Casings makes one type of plastic shell for calculators. Wyoming expects
ID: 2334705 • Letter: W
Question
Wyoming Casings makes one type of plastic shell for calculators. Wyoming expects to sell 160,000 units of this shell for the upcoming year. The beginning inventory for this shell expected to be 20,000 units. However, the target ending finished goods inventory for the upcoming year is 5,000 units. Each unit (shell) requires 6 ounces of plastic. At the beginning of the upcoming year, 60,000 ounces of plastic are expected to be in inventory. Management has set a target to have plastic ending inventory equal to three months’ production requirements. Sales and production take place evenly throughout the year. The selling price of one shell is $1.40 and the cost per ounce of plastic is $0.15.
Requirements:
1. Prepare Wyoming’s sales revenue budget for the upcoming year.
2. Prepare Wyoming’s production budget for calculator shells for the upcoming year.
3. Prepare Wyoming’s direct materials purchases budget for plastic in ounces and dollars for the upcoming year.
Explanation / Answer
Requirement 1
Wyoming Casing
Sales Budget
Units to be sold
160000
Price per Unit
$ 1.40
Total Sales revenue
$ 224,000.00
Requirement 2
Wyoming Casing
Production Budget
Units to be sold
160000
Add: Desired Ending Finished Inventory
5000
Total Units needed
165000
Less : Beginning Finished Inventory
20000
Units to be Produced
145000
Requirement 3
Wyoming Casing
Direct material Purchase Budget
Total Finished Units to be Produced (in Units)
145000
Raw material needed per Finished Unit (in Ounces)
6
Total Raw material Required for production ( in Ounces)
870000
Add: Desired Ending Inventory ( in Ounces)
240000
Total raw material needed ( in Ounces)
1110000
Less: Beginning Raw Material available ( in Ounces)
60000
Raw material units to purchase ( in Ounces)
1050000
Cost per Ounce of Plastic
$ 0.15
Total Cost of Purchases
$ 157,500.00
Working note
Desired Ending Inventory of raw material
(A)
Expected yearly sales In units
160000
(B)= A/4
Quarterly sales or 3 month's sales (160000/4)
40000
(C )
Raw material needed per Finished Unit (in Ounces)
6
(BxC)
Three month's Production requirement
240000
Wyoming Casing
Sales Budget
Units to be sold
160000
Price per Unit
$ 1.40
Total Sales revenue
$ 224,000.00
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