RyRy, Inc. manufactures dance apparel. Unit sales projections for the first five
ID: 2403637 • Letter: R
Question
RyRy, Inc. manufactures dance apparel. Unit sales projections for the first five months of the upcoming year are as follows:
January 3500
February 3,800
March 3,300
April 4800
May 5,000
Beginning finished goods inventory consisted of 750 units. The desired inventory of units at the end of each month in the upcoming year should equal 25% of the following month’s budgeted unit sales.
Each unit requires 4 yards of fabric. The company wants to have 20% of the fabric required for the next month’s expected production on hand at the end of each month. This inventory requirement was met at the end of the previous year. The fabric costs $0.20 per yard.
What is the expected dollar amount of raw material purchases for the first quarter of the upcoming year?
Explanation / Answer
PRODUCTION BUDGET Jan Feb Mar QUARTER April May Budgeted Sales Units 3,500 3,800 3,300 10,600 4,800 5,000 Add: Desired Ending Finished inventory 950 825 1,200 1,200 1,250 Total Needs 4,450 4,625 4,500 11,800 6,050 Less: Beginning Finished Inventory 750 950 825 750 1,200 Required Production in units 3,700 3,675 3,675 11,050 4,850 RAW MATERIAL PURCHASE BUDGET Jan Feb Mar QUARTER April Budgeted Production units 3,700 3,675 3,675 11,050 4,850 Raw material Required per unit 4 4 4 4 4 Total Raw material requirement 14,800 14,700 14,700 44,200 19,400 Add: Desired Ending Inventory 2,940 2,940 3,880 12,000 Total needs 17,740 17,640 18,580 56,200 Less: Beginning Inventory 2,960 2,940 2,940 2,960 Purchase Units 14,780 14,700 15,640 53,240 Cost price per unit 0.20 0.20 0.20 0.20 Budgeted Purchase in $ 2,956 2,940 3,128 10,648
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