1,510,000 The company budgeted sales at 600,000 units per month in April, June,
ID: 2578874 • Letter: 1
Question
1,510,000
The company budgeted sales at 600,000 units per month in April, June, and July and at 500,000 units in May. The selling price is $4 per unit. The inventory of finished goods on April 1 was 150,000 units. The finished goods inventory at the end of each month equals 25 percent of sales anticipated for the following month. There is no work in process. The inventory of raw materials on April 1 was 71,875 pounds. At the end of each month, the raw materials inventory equals no less than 50 percent of production requirements for the following month. The company purchases materials in quantities of 63,500 pounds per shipment. Selling expenses are 10 percent of gross sales. Administrative expenses, which include depreciation of $2,500 per month on office furniture and fixtures, total $165,000 per month. The manufacturing budget for tiles, based on normal production of 500,000 units per month, follows: Materials (0.25 pound per tile, 125,000 pounds, $4 per pound) 500,000 Labor 400,000 Variable overhead 210,000 Fixed overhead (includes depreciation of $200,000) 400,0001,510,000
Required: a. Prepare schedules computing inventory budgets by months for 1. Production in units for April, May, and June. (Do not round intermediate calculations.) BRIGHTON, INC Schedule Computing Production Budget (Units) For April, May, and June June Budgeted sales Inventory required at end of month Total needs Less: Inventory on hand at beginning of month Budgeted production - Units April 600,000 125,000 725,000 150,000 575,000 May 500,000 150,000 650,000 125,000 525,000 600,000 150,000 750,000 150,000 600,000Explanation / Answer
1) APRIL MAY JUNE JULY Budgeted sales 600000 500000 600000 600000 Desired ending inventory 125000 150000 150000 Total needs 725000 650000 750000 Less: Inventory on hand at the beginning of the month 150000 125000 150000 Bugeted prodution 575000 525000 600000 2) Raw material purchases: Production requirements (pounds) 143750 131250 150000 Desired ending inventory 65625 75000 Total pound needs 209375 206250 Beginning inventory 71875 118625 Balance required by purchase 137500 87625 Budgeted purchases-Pounds 190500 127000 PROJECTED INCOME STATEMENT FOR MAY Sales 2000000 Less: Sales discounts 20000 Bad debts expense 10000 30000 Net sales 1970000 Cost of sales: 1510000 Direct materials 500000 Labor 400000 Variable overhead 210000 Fixed overhead 400000 1510000 Gross profit 460000 Expenses: Selling expenses 200000 Administrative expenses 165000 365000 Net operating income 95000
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