Question

Budgeting Production and Purchases and Just-In-Time Materials Inventory
Hancock Manufacturing, Inc. is preparing budgets for the third quarter of 2016. Hancock produces only one product in its factory. This product requires 5 pounds of material B, 2 pounds of material G, and a component, K, that is purchased from another manufacturer. Hancock operates on a just-in-time basis for material B. As a result, Hancock maintains no inventory of material B. On July 1, 2016, the inventory of material G is expected to be 3,000 pounds and the inventory of component K is expected to be 1,500 units. Hancock wants the inventories of G and K at September 30, 2016, to be 20% less than the inventories at July 1, 2016. The inventory of finished products at June 30, 2016, is expected to be 2,000 units; the desired inventory at September 30, 2016, is 4,000 units to allow a buildup for heavy sales in the fourth quarter. The sales forecast for the third quarter is 13,000 units at $300 each. Budgeted purchase costs are $10 per pound for B, $7 per pound for G, and $40 per component for K.

Do not use negative signs with any of your answers below.

a. Prepare the production budget for Hancock Manufacturing, Inc., for the third quarter of 2016.

Hancock Manufacturing, Inc. Production Budget For the Quarter Ended September 30, 2016
Forecast unit sales			Answer
Desired ending inventory			Answer
Quantity to be available			Answer
Beginning inventory			Answer
Total production to be scheduled			Answer

b. Prepare the direct material budget for Hancock Manufacturing, Inc., for the third quarter of 2016.

Hancock Manufacturing, Inc. Direct Material Budget For the Quarter Ended September 30, 2016
			Material B			Material G			Component K
Scheduled production			Answer			Answer			Answer
			X	Answer		X	Answer		X	Answer
Direct material required			Answer			Answer			Answer
Desired ending inventories			Answer			Answer			Answer
Total to be available			Answer			Answer			Answer
Beginning inventory			Answer			Answer			Answer
Total units of material to be purchased			Answer			Answer			Answer
Unit purchase price			X	$Answer		X	$Answer		X	$Answer
Total material purchases			$Answer			$Answer			$Answer

Answer 1