Exercise 7-13 Production and Direct Materials Budgets [LO3, LO4] Tonga Toys manu
ID: 2490172 • Letter: E
Question
Exercise 7-13 Production and Direct Materials Budgets [LO3, LO4]
Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires five pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter—July, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements:
The finished goods inventory on hand at the end of each month must be equal to 5,000 units plus 35% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 18,650 units.
The raw materials inventory on hand at the end of each month must be equal to one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 for material A135 is budgeted to be 106,250 pounds.
Prepare a production budget for Playclay for the months July, August, September, and October. (Input all amounts as positive values. Do not round intermediate calculations.)
Prepare a direct materials budget showing the quantity of material A135 to be purchased for July, August, and September and for the quarter in total. (Input all amounts as positive values. Do not round intermediate calculations.)
Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires five pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter—July, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements:
Explanation / Answer
Production Budget
July
Aug
Sept
Oct
Budgeted sales
39,000
49,000
69,000
34,000
Add: Closing inventory
22,150
29,150
16,900
11,650
Total needs
61,150
78,150
85,900
45,650
Less: Opening inventory
(18,650)
(22,150)
(29,150)
(16,900)
Required inventory
42,500
56,000
56,750
28,750
July = 5000 + ( 49,000 * 35%) = 22,150
August = 5000 + ( 69000*35%) = 29,150
Sept = 5,000 + (34,000*35%) = 16,900
Oct = 5,000 + (19,000 *35%) = 11,650
Direct materials budget
July
Aug
sept
Quarter
Production needs
42,500
56,000
56,750
155,250
Units per pound
5
5
5
5
Total pounds
212,500
280,000
283,750
776,250
Add:Closing inventory
140,000
141,875
71,875
71,875
Total needs
352,500
421,875
355,625
848,125
Less: opening inventory
-106,250
-140,000
-141,875
-106,250
Material purchases
246,250
281,875
213,750
741,875
Production Budget
July
Aug
Sept
Oct
Budgeted sales
39,000
49,000
69,000
34,000
Add: Closing inventory
22,150
29,150
16,900
11,650
Total needs
61,150
78,150
85,900
45,650
Less: Opening inventory
(18,650)
(22,150)
(29,150)
(16,900)
Required inventory
42,500
56,000
56,750
28,750
July = 5000 + ( 49,000 * 35%) = 22,150
August = 5000 + ( 69000*35%) = 29,150
Sept = 5,000 + (34,000*35%) = 16,900
Oct = 5,000 + (19,000 *35%) = 11,650
Direct materials budget
July
Aug
sept
Quarter
Production needs
42,500
56,000
56,750
155,250
Units per pound
5
5
5
5
Total pounds
212,500
280,000
283,750
776,250
Add:Closing inventory
140,000
141,875
71,875
71,875
Total needs
352,500
421,875
355,625
848,125
Less: opening inventory
-106,250
-140,000
-141,875
-106,250
Material purchases
246,250
281,875
213,750
741,875
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