Fuqua Company\'s sales budget projects unit sales of part 198Z of 10,400 units i

Question

Fuqua Company's sales budget projects unit sales of part 198Z of 10,400 units in January, 13,000 units in February, and 13,400 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending finished goods inventory to equal 20% of the next month's expected unit sales These goals were met at December 31, 2016. Prepare a production budget for January and February 2017, FUQUA COMPANY Production Budget Janua February LINK TO TEXT

Explanation / Answer

Solution:

Production Budget:

Ending finished goods inventory:

13,000 * 20% = 2,600

13,400 * 20% = 2,680

Beginning finished goods inventory:

10,400 * 20% = 2,080

13,000 * 20% = 2,600

Direct Materials Budget:

FUQUA COMPANY Production Budget For the Two Months Ending February 28, 2017 January February Expected unit sales      10,400      13,000 Add desired ending finished goods inventory         2,600        2,680 Total required units      13,000      15,680 Less beginning finished goods inventory         2,080        2,600 Required production units      10,920      13,080

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