Question

White Corporation’s budget calls for the following sales for next year: Quarter 1 90,000 units Quarter...

White Corporation’s budget calls for the following sales for next year:

Quarter 1 90,000 units Quarter 3 68,000 units
Quarter 2 76,000 units Quarter 4 96,000 units

Each unit of the product requires 3 pounds of direct materials. The company’s policy is to begin each quarter with an inventory of product equal to 5% of that quarter’s estimated sales requirements and an inventory of direct materials equal to 20% of that quarter’s estimated direct materials requirements for production.

Required:

1. Determine the production budget for the second quarter.

2. Determine the materials purchases budget for the second quarter.

Business   Accounting   
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Answer #1
No. Particulars Second quarter Thired quarter
1. Budgeted sales (units) 276,000 368,000
Add: Desired Ending inventory (368000*5%), (496,000*5%) 18,400 24,800
Less: Beginning inventory (276000*5%) (13,800) (18,400)
Budgeted production (units) 280,600 374,400
2. Direct material per unit (pound) 3
Direct material required for budgeted production 841,800
Add: Desired Ending inventory (374400*3*20%) 224,640
Less: Beginning inventory (168,360)
Materials purchases budget for the second quarter (pounds) 898,080
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