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ID: 2372202 • Letter: #
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A sales budget is given below for one of the products
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manufactured by Vincent, Ltd.
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Month/Sales Budget in Units
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July/18,000
August/20,000
September/24,000
October/26,000
November/19,000
December/16,000
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The inventory of
finished goods at the end of each month must be
equal to 5,000
units plus 10% of the next month's sales.
On June 30, the
finished goods inventory totaled 6,800 units.
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Each unit of product requires three ounces of a special
liquid extract known as SV-6. Sometimes the extract is in
short supply; for this reason, the company has a policy of
maintaining an inventory at the end of each month equal to one
half of the next month's production needs. This requirement was met
on July 1 of the current year.
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Required: Prepare a budget showing the quantity of SV-6 to be
purchased for
September.
Explanation / Answer
Production Budget July August September October November December A Opening Stock of unit 6800 7000 7400 7600 6900 6600 B Sale (in Unit) 18000 20000 24000 26000 19000 16000 C Closing Stock (25%of Expected sales unit in the following month) 7000 7400 7600 6900 6600 5000 D Production Required[B+C-A] 18200 20400 24200 25300 18700 14400 Material Budget July August September October November December Production 18200 20400 24200 25300 18700 14400 Material required per unit 3 Ounces 3 Ounces 3 Ounces 3 Ounces 3 Ounces 3 Ounces Total Material required for production 54600 61200 72600 75900 56100 43200 Opening Stock of raw Material 0 30600 36300 37950 28050 21600 Closing stock of raw material 30600 36300 37950 28050 21600 0 Purchase of raw Material (SV-6) 85200 66900 74250 66000 49650 21600
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