Question

Neven expects to have 20,000 units of finished goods inventory on hand on March 31 and...

  1. Neven expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July:

April

120,000

May

140,000

June

150,000

July

120,000

At the end of each month Neven targets ending finished goods inventory to be 20% of the next month’s projected sales (in units).

  1. Calculate budgeted production (in units) for May.
  2. Each unit requires four (4) pounds of direct materials. The ending inventory target for direct materials inventory is equal to 10% of the next month’s budgeted unit sales. How many pounds of direct materials will be purchased in May?

Business   Accounting   
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Answer #1

a.

May
Expected Sales 140000
Add: Ending inventory (150000*20%) 30000
Less: Beginning inventory (140000*20%) (28000)
Budgeted production (in units) for May 142000

b.

May
Budgeted production (in units) for May 142000
Direct material per unit 4
Total Direct material required for production 568000
Add: Ending inventory of Direct material (150000*10%*4) 60000
Less: Beginning inventory of Direct material (140000*10%*4) (56000)
Pounds of direct materials will be purchased in May 572000
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