Fuqua Company\'s sales budget projects unit sales of part 198Z of 11,000 units i

Question

Fuqua Company's sales budget projects unit sales of part 198Z of 11,000 units in January, 12,400 units in February, and 13,700 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending fished goods inventory to equal 20% of the next month's expected unit sales. These goals were met at December 31, 2016. Prepare a production budget for January and February 2017 FUQUA COMPANY Prepare a direct materials budget for January 2017. FUQUA COMPANY Direct Materials Budget January

Explanation / Answer

a Production Budget For the Two Months Ending February 28, 2017 January February Expected unit sales 11000 12400 Add: desired ending finished goods inventory 2480 2740 Total required units 13480 15140 Less: beginning finished goods inventory 2200 2480 Required production units 11280 12660 b Direct Materials Budget For the Month Ending January 31, 2017 January Units to be produced 11280 Direct material pounds per unit 3 Total pounds needed for production 33840 Add: desired pounds in ending materials inventory 15192 Total materials required 49032 Less: beginning direct materials (pounds) 13536 Direct materials purchases 35496 Cost per pound 3 Total cost of direct materials purchases 106488

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