Croy Inc. has the following projected sales for the next five months: Month Sale

Question

Croy Inc. has the following projected sales for the next five months:

Month Sales in Units April 3,510 May 3,875 June 4,610 July 4,140 August 3,930

Croy’s finished goods inventory policy is to have 60 percent of the next month’s sales on hand at the end of each month. Direct material costs $2.60 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,729 pounds.

Croy Inc. has the following projected sales for the next five months Month April May June July August Sales in Units 3,510 3,875 4,610 4,140 3,930 Croy's finished goods inventory policy is to have 60 percent of the next month's sales on hand at the end of each month. Direct material costs $2.60 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month's production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,729 pounds. Required 1. Determine budgeted production for April, May, and June. (Do not round your intermediate calculations and round your final answer to the nearest whole number.) April May June Budgeted Production (Units) 2. Determine the budgeted cost of materials purchased for April, May, and June. (Use rounded Budgeted Production units in intermediate calculations. Round your answers to 2 decimal places.) April May June Budgeted Cost of Material Purchased

Explanation / Answer

(1) Budgeted Production:-

April

May

June

Sale

3510

3875

4610

(+) Finished goods Ending Inventory

(3875 * 60%)

=2325

(4610 * 60%)

=2766

(4140 * 60%)

=2484

(-) Finished goods beginning Inventory

(3510 * 60%)

=2106

2325

2766

Budgeted Production

3729

4316

4328

(2) Budgeted cost of Material Purchase :-

April

May

June

Budgeted Production

3729

4316

4328

Direct Material Consumption (A)

(3729 * 2)

=7458

(4316 * 2)

=8632

(4328 * 2)

=8656

DM Ending Inventory (B)

(8632 * 50%)

=4316

(8656 * 50%)

=4328

(8028 * 50%)

=4014

DM beginning Inventory (C)

3729

4316

4328

DM purchase (A + B – C)

8045

8644

8342

Budgeted Cost of DM purchase

(8045 * 2.60)

=20917

(8644 * 2.60)

=22474.4

(8342 * 2.60)

=21689.2

July Sale = 4140

Ending Inventory for july = (3930 * 60%) = 2358

Beginning Inventory for July = 2484

Budget Production for july = 4140 + 2358 – 2484 = 4014

DM consumption = 4014 * 2 = 8028

April

May

June

Sale

3510

3875

4610

(+) Finished goods Ending Inventory

(3875 * 60%)

=2325

(4610 * 60%)

=2766

(4140 * 60%)

=2484

(-) Finished goods beginning Inventory

(3510 * 60%)

=2106

2325

2766

Budgeted Production

3729

4316

4328

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