A company expects to begin the coming year with 6,000 ceramic pots in finished g
ID: 2504333 • Letter: A
Question
A company expects to begin the coming year with 6,000 ceramic pots in finished goods inventory. It expects to sell 85,000 ceramic pots and end the year with 8,000 pots in the finished goods inventory. Four pounds of clay go into each ceramic pot. The company expects to have 4,000 pounds of clay on hand at the beginning of the coming year and wishes to end the year with 6,000 pounds in inventory.
a. Prepare a production budget showing the number ceramic pots that the company must manufacture to carry out these plans.
b. Prepare a direct materials purchases budget showing the number of pounds of clay that the company must purchase during the year.
Explanation / Answer
A company expects to begin the coming year with 6,000 ceramic pots in finished goods inventory. It expects to sell 85,000 ceramic pots and end the year with 8,000 pots in the finished goods inventory. Four pounds of clay go into each ceramic pot. The company expects to have 4,000 pounds of clay on hand at the beginning of the coming year and wishes to end the year with 6,000 pounds in inventory.
a. Prepare a production budget showing the number ceramic pots that the company must manufacture to carry out these plans.
b. Prepare a direct materials purchases budget showing the number of pounds of clay that the company must purchase during the year.
Units
Ceramic Pots
Expected units to be sold 85000
Plus desired ending inventory 8000
Total 93000
Less estimated beginning inventory, 6000
Total units to be produced 87000
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