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.
1. Determine the production budget for the second quarter.
2. Determine the materials purchases budget for the second quarter.
|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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