The Ahead of Our Time Inc. manufactures state of the art bamboo dining room tabl
ID: 2519670 • Letter: T
Question
The Ahead of Our Time Inc. manufactures state of the art bamboo dining room tables. Budgeted sales for the first 5 months of the years are as follow:
Month Budgeted Sales(units)
January 200
Feburary 240
March 180
April 160
May 240
June 300
Each Table requires 10 square feet of bamboo at a cost of $20 per square foot.
The Company wants to maintain an inventory of tables equal to 25% of the following month's sales. At the beginning of the year, 40 tables were on hand
Assume the company maintains an inventory of bamboo equal to 10% of the next month's production needs. At the beginning of the year, 240 square feet of bamboo are on hand. Inventory of bamboo at April 30 is estimated to be 255 square Feet.
A. Prepare a production budget, in units, for each of the first 4 months.
B. Prepare a Direct Material purchases budget, in dollars, for each of the first three months.
Explanation / Answer
Answer for A)
Production budget for first four months
60
[I.e 240×25%]
45
[I.e 180×25%]
40
[I.e 160×25%]
60
[.e 240×25%]
Answer for B)
Direct material purchase budget(in dollars) for first three months.
44000
[I.e 220 units×10sq ft×$20]
45000
[I.e 225 units×10sq ft×$20]
35000
[I.e 175 units×10sq ft×$20]
4500
[I.e $45000×10%]
3500
[I.e $35000×10%]
3600
[180 units×10sq ft×$20×10%]
4800
[I.e 240sq ft×$20]
note:
1) Opening stocks of month is closing stock of previous month.
2)Raw material requirements are drawn with production budget estimates
Particulars january February March April Sales estimated 200 240 180 160 (Add ) Closing inventory60
[I.e 240×25%]
45
[I.e 180×25%]
40
[I.e 160×25%]
60
[.e 240×25%]
(Less)opening imventory 40[given] 60 45 40 Planned production 220 225 175 180Related Questions
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