Question 3 5 Marks Varney Company makes rolling suitcases. Its sales budget for
ID: 2553434 • Letter: Q
Question
Question 3 5 Marks Varney Company makes rolling suitcases. Its sales budget for four months is: Month Sales R March 15,000 April 20,000 May 40,000 June 60,000 Varney's policy is that ending inventory of finished suitcases should equal 30% of the next month's sales. Beginning inventory (March 1) is 5,300 suitcases. Each suitcase required 1.5 meters of ballistic nylon. The ending inventory policy for nylon is that 20% of the following month's production needs must be on hand. On March 1, Varney had 10,450 meters of nylon in inventory. Required: 3.1 What is the desired ending inventory of suitcases for April? (1) 3.2 What is the budgeted production of suitcases for April? (1) 3.3 What is the desired ending inventory of nylon for March? (1) 3.4 What are the budgeted meters of nylon to be purchased in March? (1) 3.5 Assuming each suitcase required two meters of ballistic nylon, what is the desired ending inventory of nylon for March?
Explanation / Answer
Working Note :
+ Ending Inventory
[ 30 % * next month's sales]
Answer 3.1 :
Desired ending inventory of suitcases for April :
= May 's sales in units * 30 % = 40,000 units * 30 % = 12,000 suitcases
Answer 3.2
Beginning inventory for of suitcases for April = ie ending inventory of suitcases for March
= 20,000 units * 30 % = 6,000 units
Total units of suitcases needed in April = Budgeted sales in unit in April + Desired ending inventory for April
= 20,000 + 12,000 = 32,000 units .
Budgeted production of suitcases for April
= Total units of suitcases needed in April - Beginning inventory for of suitcases for April
= 32,000 units . - 6,000 units = 26,000 units of suitcases
Answer 3.3
Desired ending inventory of nylon for March
= 1.5 meters * Budgeted production of suitcases for April * 20 %
= 1.5 * 26,000 (Ref working note) * 20 % = 7,800 meters
Answer 3.4
Nylon needed for production in March = Budgeted Production of suitcases in march * 1.5 meters
= 15,700 (Ref working note) * 1.5 = 23,550 meters
Total meters of nylon needed in March = Desired ending inventory of nylon for March + Nylon needed for production
= 7,800 meters + 23,550 meters = 31,350 meters
Required budgeted meters of nylon to be purchased in March :
= Total meters of nylon needed in March - Begining inventory of nylon for March
= 31,350 meters - 10,450 meters = 20,900 meters
Answer 3.5
Desired ending inventory of nylon for March = 2 meters * Budgeted production of suitcases for April * 20 %
= 2 * 26,000 (Ref working note) * 20 % = 10,400 meters
March April May Sales in units 15,000 20,000 40,000+ Ending Inventory
[ 30 % * next month's sales]
6,000 12,000 18,000 Total units needed 21,000 32,000 58,000 Less : Beginning Inventory (5,300) (6,000) (12,000) Budgeted Production of suitcases 15,700 26,000 46,000Related Questions
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