Question

Croy Inc. has the following projected sales for the next five months:   

Month	Sales in Units
April	3,560
May	3,905
June	4,510
July	4,155
August	3,900

Croy’s finished goods inventory policy is to have 60 percent of the next month’s sales on hand at the end of each month. Direct material costs $2.70 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,767 pounds.     

Required:

1. Determine budgeted production for April, May, and June. (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

2. Determine the budgeted cost of materials purchased for April, May, and June. (Use rounded Budgeted Production units in intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Production budget :

	April	May	June
Sales unit	3560	3905	4510
Add: Desired ending inventory	2343	2706	2493
Total needs	5903	6611	7003
Less: Beginning inventory	-2136	-2343	-2706
Production units	3767	4268	4297

Cost of material purchased :

	April	May	June
Production units	3767	4268	4297
Raw material per unit	2	2	2
Raw material needed for production	7534	8536	8594
Add: Desired ending inventory	4268	4297	4002
Total	11802	12833	12596
Less: Beginning inventory	-3767	-4268	-4297
Raw material purchase	8035	8565	8299
Cost per pound	2.70	2.70	2.70
Cost of raw material purchase	21694.50	23125.50	22407.30