Croy Inc. has the following projected sales for the next five months: Month Sale

Question

Croy Inc. has the following projected sales for the next five months: Month Sales in Units April 3,590 May 3,800 June 4,560 July 4,145 August 3,950 Croy’s finished goods inventory policy is to have 60 percent of the next month’s sales on hand at the end of each month. Direct material costs $2.60 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,716 pounds.

Required: 1. Determine budgeted production for April, May, and June. (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

2. Determine the budgeted cost of materials purchased for April, May, and June. (Use rounded Budgeted Production units in intermediate calculations. Round your answers to 2 decimal places.)

April May June Budgeted Production (Units)

Explanation / Answer

Since Opening inventory of finished goods of April is not given, I am taking it as 0

Calculations Particulars April May June July August A Sales Quantity 3590 3800 4560 4145 3950 B = A of next month x 60% Closing Inventory 2280 2736 2487 2370 C = B of previous month Opening Inventory 0 2280 2736 2487 2370 E = A + B - C Production required (1) 5870 4256 4311 4028 F Material required per unit 2 2 2 2 G = E x F Total material required 11740 8512 8622 8056 H = G of next month x 50% Closing Inventory of raw materials 4256 4311 4028 I = H of previous month Opening Inventory of raw materials 3716 4256 4311 J = G + H - I Purchases required 12280 8567 8339 K Price per unit of raw materials 2.6 2.6 2.6 L = J x K Budgeted cost of materials purchased (2) 31928.00 22274.20 21681.40

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