Pargo Company is preparing its master budget for 2017. Relevant data pertaining
ID: 2462750 • Letter: P
Question
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.
Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 22%, 26%, 27%, and 25%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 15% higher than the budgeted sales for the first quarter of 2017.
Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume.
Direct materials. Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are 498,000 pounds.
Prepare the sales, production, and direct materials budgets by quarters for 2017.
Explanation / Answer
Particulars
Q 1
Q 2
Q 3
Q 4
Total
Q1
Sales (1)
44000
52000
54000
50000
200000
50600
Sales price (2)
40
40
40
47
47
Sales value (3)=(1)*(2)
1760000
2080000
2160000
2350000
8350000
2378200
Ending inventory of (25% of next quarter sales) (4)
13000
13500
12500
12650
Opening inventory (5)
0
13000
13500
12500
Production (6)=(1)+(4)-(5)
57000
52500
53000
50150
212650
Raw material for production (7)=(6)*2
114000
105000
106000
100300
425300
498000
Ending inventory of (10% of next quarter production) (8)
10500
10600
10030
49800
Opening inventory (9)
0
10500
10600
10030
Purchase (10)=(7)+(8)-(9)
124500
105100
105430
140070
475100
Per unit cost (11)
11
11
11
11
Total purchase cost (10)*(11)
1369500
1156100
1159730
1540770
5226100
Particulars
Q 1
Q 2
Q 3
Q 4
Total
Q1
Sales (1)
44000
52000
54000
50000
200000
50600
Sales price (2)
40
40
40
47
47
Sales value (3)=(1)*(2)
1760000
2080000
2160000
2350000
8350000
2378200
Ending inventory of (25% of next quarter sales) (4)
13000
13500
12500
12650
Opening inventory (5)
0
13000
13500
12500
Production (6)=(1)+(4)-(5)
57000
52500
53000
50150
212650
Raw material for production (7)=(6)*2
114000
105000
106000
100300
425300
498000
Ending inventory of (10% of next quarter production) (8)
10500
10600
10030
49800
Opening inventory (9)
0
10500
10600
10030
Purchase (10)=(7)+(8)-(9)
124500
105100
105430
140070
475100
Per unit cost (11)
11
11
11
11
Total purchase cost (10)*(11)
1369500
1156100
1159730
1540770
5226100
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.