Chips, Inc. is preparing the budget for its fiscal year ending on 30 June 2018 (
ID: 2527666 • Letter: C
Question
Chips, Inc. is preparing the budget for its fiscal year ending on 30 June 2018 (FY2017). The company produces Widgets using the raw material, oximate polyethyl hydroxide (OPH). Three pounds of OPH are needed to produce each Widget. The market price of OPH varies but Chips expects the average price to be $2.80 per pound. Chips plans to sell 510,000 Widgets during FY2017. The table below shows the beginning inventories and planned ending inventories for OPH and Widgets Inventories OPH: Raw materials (Ibs.) Widgets: Finished goods (units) 1-Jul-17 30-Jun-18 40,000 44,000 66,000 41,000 Answers Determine the number of Widgets schedule to be produced in FY2017 What is the expected number of lbs. of OPH expected to be used in FY2017? How many lbs. of OPH should Chips budget to purchase? What is the purchases budget of OPH? What would the purchases budget of OPH be if sales were increased by 10%?Explanation / Answer
Answers
Units plan to be sold
510000
Add: Ending Inventory
41000
Total
551000
Less: Beginning Inventory
44000
No. of units to be produced [Answer 1]
507000
No. of units to be produced [Answer 1]
507000
Requirement of OPH per unit
3
Expected number of 'lbs' of OPH expected to be used [Answer 2]
1521000
Expected number of 'lbs' of OPH expected to be used [Answer 2]
1521000
Add: Ending Inventory
66000
Total
1587000
Less: Beginning Inventory
40000
No. of units to be produced [Answer 3]
1547000
No. of units to be produced [Answer 3]
1547000
average price per pound
2.8
Purchase Budget of OPH [Answer 4]
4331600
Units plan to be sold
561000
Add: Ending Inventory
41000
Total
602000
Less: Beginning Inventory
44000
No. of units to be produced
558000
No. of units to be produced
558000
Requirement of OPH per unit
3
Expected number of 'lbs' of OPH expected to be used
1674000
Expected number of 'lbs' of OPH expected to be used
1674000
Add: Ending Inventory
66000
Total
1740000
Less: Beginning Inventory
40000
No. of units to be produced
1700000
No. of units to be produced
1700000
average orice per pound
2.8
Purchase Budget of OPH [Answer 5]
4760000
Units plan to be sold
510000
Add: Ending Inventory
41000
Total
551000
Less: Beginning Inventory
44000
No. of units to be produced [Answer 1]
507000
No. of units to be produced [Answer 1]
507000
Requirement of OPH per unit
3
Expected number of 'lbs' of OPH expected to be used [Answer 2]
1521000
Expected number of 'lbs' of OPH expected to be used [Answer 2]
1521000
Add: Ending Inventory
66000
Total
1587000
Less: Beginning Inventory
40000
No. of units to be produced [Answer 3]
1547000
No. of units to be produced [Answer 3]
1547000
average price per pound
2.8
Purchase Budget of OPH [Answer 4]
4331600
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