On January 1, 2017, the Hardin Company budget committee has reached agreement on
ID: 2395513 • Letter: O
Question
On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017 Sales units Ending raw materials inventory: 40% of the next quarter's production requirements Ending finished goods inventory: 25% of the next quarter's expected sales units Third-quarter production: First quarter 5,800; second quarter 6,700; third quarter 7,200 7,800 units The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound Prepare a production budget by quarters for the 6-month period ended June 30, 2017. HARDIN COMPANY Production Budget QuarterExplanation / Answer
Answers
Working
Working
Q1
Q2
A
Next quarter budgeted sales
6700
7200
B
Ratio of Inventory
40%
40%
C = A x B
Budgeted Ending Inventory
2680
2880
D
Budgeted Unit Sales
5800
6700
E = C+D
Required Units of available production
8480
9580
F
Budgeted Beginning Inventory
2320
2680
G = E - F
Units to be produced
6160
6900
Answer
Production Budget
for 6 month period ended June 30, 2017
Quarter
1
2
Budgeted Sales Units
5,800
6,700
Add: Desired expected ending inventory of finished goods
2,680
2,880
Total needs (requirements)
8,480
9,580
Less: Beginning inventory of finished goods
2,320
2,680
Units required to be produced
6,160
6,900
13,060
Working
Working
Q1
Q2
Q3
A
Budgeted Production
6,160
6,900
7,800
B
Material requirement per unit
4
4
4
C=A x B
Material needed for production
24,640
27,600
31,200
D = 25% of next quarter's 'C'
Budgeted Ending Inventory
6,900
7,800
E = C+D
Total material requirements
31,540
35,400
F
Beginning Inventory
6,160
6,900
G = E - F
Material to be purchased
25,380
28,500
H
Cost of material per pound
$ 5.00
$ 5.00
I = G x H
Total budgeted direct material cost
$ 126,900.00
$ 142,500.00
Answer
Direct Material Budget
for 6 month period ended June 30, 2017
Quarter
1
2
Budgeted production of units of finished goods
6,160
6,900
Material required per unit
4
4
Requirement for production
24,640
27,600
Add: Desired expected ending inventory of raw material
6,900
7,800
Total needs (requirements)
31,540
35,400
Less: Beginning Inventory of raw material
6,160
6,900
Raw material to be purchased
25,380
28,500
Cost of raw material per pound
$ 5.00
$ 5.00
Total cost of raw material purchased
$ 126,900.00
$ 142,500.00
$ 269,400.00
Working
Q1
Q2
A
Next quarter budgeted sales
6700
7200
B
Ratio of Inventory
40%
40%
C = A x B
Budgeted Ending Inventory
2680
2880
D
Budgeted Unit Sales
5800
6700
E = C+D
Required Units of available production
8480
9580
F
Budgeted Beginning Inventory
2320
2680
G = E - F
Units to be produced
6160
6900
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