The following budget information relates to the Staples Company unit sales: 2016
ID: 2600131 • Letter: T
Question
The following budget information relates to the Staples Company unit sales:
2016 Units
April 27,000
May 32,000
June 17,000
July 21,000
August 16,000
The finished goods units on hand on March 31, 2016, was 2,000
units. Each unit requires 3 pounds of raw materials that are
estimated to cost an average of $6 per pound. It is the company's
policy to maintain a finished goods inventory at the end of each
month equal to 15% of next month's anticipated sales. They also have
a policy of maintaining a raw materials inventory at the end of each
month equal to 25% of the pounds needed for the following month's
production. There were 10,000 pounds of raw materials on hand at
March 31, 2016.
INSTRUCTIONS
Prepare the following budget reports for the second quarter of 2016,
a) a production budget
(b) a direct materials budget.
Staples Company Production Budget For the Quarter Ending June 30, 2016 (a) April May June (b) Staples Company Direct Materials Budget For the Quarter Ending June 30, 2016 April May JuneExplanation / Answer
Staples Company Production Budget For the Quarter Ending June 30, 2016 April May June Budgeted sales 27000 32000 17000 Add: Desired ending inventory 4800 2550 3150 Total units required 31800 34550 20150 Less: Beginning inventory 2000 4800 2550 Required production 29800 29750 17600 b Staples Company Direct Materials Budget For the Quarter Ending June 30, 2016 April May June Required production 29800 29750 17600 Pounds of raw materials perunit 3 3 3 Total materials for production 89400 89250 52800 Add: Desired ending inventory 22312.5 13200 15187.5 Total pounds of raw materials required 111712.5 102450 67987.5 Less: Beginning inventory 10000 22312.5 13200 Pounds of raw materials to be purchased 101712.5 80137.5 54787.5 Cost per pound 6 6 6 Raw material purchases 610275 480825 328725
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