Sales units: First quarter 5,000; second quarter 6,000; third quarter 7,000. End
ID: 2570150 • Letter: S
Question
Sales units: First quarter 5,000; second quarter 6,000; third quarter 7,000. 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: 7,200 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. Three pounds of raw materials are required to make each unit of finished goods. Raw materials pur- chased are expected to cost $4 per pound. Instructions (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.Explanation / Answer
Solution:
Part 2 --- Direct materials purchases budget
Direct Materials Budget
Quarter 1
Quarter 2
Quarter 3
Budgeted Sales unit
5000
6000
7000
Plus: Desired Ending inventory
(25% of next quarter's expected sales units)
1500
(6000*25%)
1750
(7000*25%)
Total Needs
6500
7750
Less: Expected Beginning Inventory (Ending Inventory of Last quarter)
1250
(5000*25%)
1500
Budgeted Production Units
5250
6250
7200
Needs of Raw material per finished unit (pounds)
3
3
3
Total Raw materials need for production in pounds
15750
18750
21600
Plus: Ending Inventory of Raw materials (40% of Next Quarter's Production needs)
7500
(18750*40%)
10800
(21600*40%)
Total Raw materials needed for production
23250
29550
Less: Beginning Raw material inventory (ending Inventory of previous quarter)
6300
(15750*40%)
7500
Budgeted Raw Material Purchase in pounds
16950
22050
Price per pound of raw material
$4
$4
Budgeted cost of Direct materials purchases
$67,800
$88,200
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Direct Materials Budget
Quarter 1
Quarter 2
Quarter 3
Budgeted Sales unit
5000
6000
7000
Plus: Desired Ending inventory
(25% of next quarter's expected sales units)
1500
(6000*25%)
1750
(7000*25%)
Total Needs
6500
7750
Less: Expected Beginning Inventory (Ending Inventory of Last quarter)
1250
(5000*25%)
1500
Budgeted Production Units
5250
6250
7200
Needs of Raw material per finished unit (pounds)
3
3
3
Total Raw materials need for production in pounds
15750
18750
21600
Plus: Ending Inventory of Raw materials (40% of Next Quarter's Production needs)
7500
(18750*40%)
10800
(21600*40%)
Total Raw materials needed for production
23250
29550
Less: Beginning Raw material inventory (ending Inventory of previous quarter)
6300
(15750*40%)
7500
Budgeted Raw Material Purchase in pounds
16950
22050
Price per pound of raw material
$4
$4
Budgeted cost of Direct materials purchases
$67,800
$88,200
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.