Question

The budget components for Park Company for the quarter ended June 30 appear below. Park sells trash cans for $12 each. Budgeted sales and production for the next three months are:

		Sales		Production
April		20,000 units		26,000 units
May		50,000 units		46,000 units
June		30,000 units		29,000 units

Park desires to have trash cans on hand at the end of each month equal to 20 percent of the following month’s budgeted sales in units. On March 31, Park had 4,000 completed units on hand. Five pounds of plastic are required for each trash can. At the end of each month, Park desires to have 10 percent of the following month’s production material needs on hand. At March 31, Park had 13,000 pounds of plastic on hand. The materials used in production cost $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor.

Determine how much the materials purchases budget will be for the month ending April 30.

Cost of materials purchases

Answer 1

Data For the month of April
Beginning inventory on March 31 (given)	13,000
Production (26000 units * 5 pounds)	130,000
Ending Inventory (46,000 units * 5 * 0.10)	23,000
Material Purchase budget on April 30 (qty)	140,000
Material cost per pound ($) (@ 0.60)	84,000

Material Purchase = Production + Ending Inventory - Beginning Inventory