On January 1, 2017, the Hardin Company budget committee has reached agreement on
ID: 2437150 • 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: First quarter 5,800; second quarter 6,700; third quarter 7,200 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: 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.
Exercise 23-6 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: Ending finished goods inventory: Third-quarter production: First quarter 5,800; second quarter 6,700; third quarter 7,200 40% of the next quarter's production requirements 25% of the next quarter's expected sales units 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 poundExplanation / Answer
Ans
Production budget:
Q1
Q2
The Expected unit sales
5800
6700
The Add desired ending finished goods Inventory
1675
(25%×6700)
1800
(25%×7200)
Total required units
7475
8500
The Less beginning finished goods Inventory
1450
(25%×5800)
1675
The Required production units
6025
6825
Direct material budget:
Q1
Q2
six months
The Units to be produced
6025
6825
The Direct material per unit
×4
×4
Total pounds needed for production
24100
27300
The Add desired ending direct material
10920
(40%×27300)
9360
(40%×7800×3)
Total material required
35020
36660
The Less beginning raw material
9640
(40%×24100)
10920
The Direct material purchase
25380
25740
The Cost per pound
$5
$5
Total cost of direct material purchase
$126,900
$128,700
$255,600
Q1
Q2
The Expected unit sales
5800
6700
The Add desired ending finished goods Inventory
1675
(25%×6700)
1800
(25%×7200)
Total required units
7475
8500
The Less beginning finished goods Inventory
1450
(25%×5800)
1675
The Required production units
6025
6825
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