Gertrude Products expects the following sales of its single product: July 6,300
ID: 2594175 • Letter: G
Question
Gertrude Products expects the following sales of its single product:
July 6,300
August 6,500
September 7,400
October 7,800
November 9,300
Gertrude desires an ending finished goods inventory to be equal to 10% of the next month’s sales needs. July 1 inventory is projected to be 630 units. Each unit requires 10 pounds of Chemical A and 17 pounds of Chemical B. July 1 materials inventory includes 12,640 pounds of Chemical A and 107,440 pounds of Chemical B. Gertrude desires to maintain a Chemical A inventory equal to 20% of next month’s production needs and a Chemical B inventory equal to 100% of next month’s production needs.
a. Prepare a production budget for Gertrude for as many months as is possible.
b. Prepare a raw materials purchases budget for both Chemical A and Chemical B for the months of July through September.
Explanation / Answer
a) Production Budget july aug Sept total oct Expected sale units 6,300 6,500 7,400 20,200 7,800 Add ending inventory 650 740 780 780 930 total needs 6,950 7,240 8,180 22,370 8,730 less beginning inventory -630 -650 -740 -630 -780 production required 6,320 6,590 7,440 21,740 7,950 Material purchase budget -Chemical A july aug Sept total production required 6,320 6,590 7,440 21,740 7,950 pounds per unit required 10 10 10 10 10 total pounds 63,200 65,900 74,400 217,400 79,500 add ending inventory 13180 14880 15900 15,900 total needs 76,380 80,780 90,300 233,300 less beginning inventory -12,640 -13,180 -14,880 -12,640 material purchase required 63,740 67,600 75,420 220,660 Material purchase budget -Chemical B july aug Sept total production required 6,320 6,590 7,440 21,740 7,950 pounds per unit required 17 17 17 17 17 total pounds 107,440 112,030 126,480 369,580 135,150 add ending inventory 112,030 126,480 135,150 135,150 total needs 219,470 238,510 261,630 504,730 less beginning inventory -107,440 -112,030 -126,480 -107,440 material purchase required 112,030 126,480 135,150 397,290
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