(a) Prepare a production budget by quarters for the 6-month period ended June 30
ID: 2522549 • Letter: #
Question
(a)
Prepare a production budget by quarters for the 6-month period ended June 30, 2017.
b)Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017.
On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017.Sales units: First quarter 5,400; second quarter 6,100; third quarter 7,900 Ending raw materials inventory: 40% of the next quarter’s production requirements Ending finished goods inventory: 25% of the next quarter’s expected sales units Third-quarter production: 7,430 units.
The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $6 per pound.
Explanation / Answer
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Q1 Q2 Q3 Sale Units 5400 6100 7900 a. Production Budget Q1 Q2 6 Months Expected units to be sold 5400 6100 11500 Desired Inventory, December 31 1525 1975 1975 Total units Available 6925 8075 13475 Estimated Inventory , December 1 1350 1525 1350 Total Units to be produced 5575 6550 12125 Working: Desired Inventory, December 31 25% of 6100 25% of 7900 Estimated Inventory , December 1 Closing of 31st December Closing of Q1 25% of 5400 b. Direct Material Budget Q1 Q2 6 Months Required units for production (5 pund*Production) 27875 32750 60625 Desired Inventory, December 31 13100 14860 14860 Total units Available 40975 47610 75485 Estimated Inventory , December 1 11150 13100 11150 Total Units to be purchased 29825 34510 64335 Unit Price 6 6 6 Total Direct Materials to be purchased 178950 207060 386010 Working: Desired Inventory, December 31 40% of 32750 (7430*5)*40% Estimated Inventory , December 1 Closing of 31st December Closing of Q1 40% of 27875Related Questions
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