Question

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017.

Sales units:		First quarter 5,100; second quarter 6,300; third quarter 7,300
Ending raw materials inventory:		40% of the next quarter’s production requirements
Ending finished goods inventory:		25% of the next quarter’s expected sales units
Third-quarter production:		7,670 units.

The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.

(a)

Prepare a production budget by quarters for the 6-month period ended June 30, 2017.

Answer 1

	Production Budget
	For the Six Months Ending June 30, 2017
	1	2	Six months
Expected Unit Sales	5100	6300
Addl Desired ending Finished goods units	1575	1825
Total Required Units	6675	8125
Less: Beginning Finished goods units	1275	1575
Required Production Units	5400	6550	11950
Workings:
Desired ending Finished goods units:
Q1 = 6300*25%=1575
Q2 = 7300*25%=1825
Beginning Finished goods units
Q1 = 5100*25%=1275