Production Budget Seafood Inc. produces shrimp in cans. The sales budget for the

Question

Production Budget

Seafood Inc. produces shrimp in cans. The sales budget for the first four months of the year is as follows: January February March April Unit Sales 200,000 240,000 220,000 200,000 Dollar Sales ($) 150,000 180,000 165,000 150,000 Company policy requires that ending inventories for each month be 35 percent of next month's sales. At the beginning of January, the inventory of shrimp is 36,000 cans. Each can of shrimp needs two raw materials: four ounces of shrimp and one can. policy requires that ending inventories of raw materials for each month be 20 percent of the next month's production needs. That policy was met on January 1. Company

Explanation / Answer

January February Unit sales       200,000       240,000 Dollar sales       150,000       180,000 Beginning inventory          36,000          84,000 Desired ending inventory          84,000          77,000 units sold       200,000       240,000 Units produced       248,000       233,000 Direct material purchase Units produced       248,000       233,000 shrimps @ 4 ounce per unit       992,000       932,000 Cans @ 1 per unit       248,000       233,000 desired inventory          46,600          42,600 shrimps @ 4 ounce per unit       186,400       170,400 Cans @ 1 per unit          46,600          42,600 Total shrimps required in ounces    1,178,400    1,102,400 Total cans required       294,600       275,600

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