Question

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.

Budgeted Sales:

Desired Ending Inventory:

Total Units Needed:

Beginning Inventory:

Total Units to Produce:

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

Budgeted Production:

Direct Materials (lbs) per unit produced:

Direct Materials needed for production:

Desired ending inventory for Direct Materials (lbs):

Total Direct Materials needed:

Beginning Inv. for Direct Materials:

Budgeted Purchases of Direct Materials (lbs):

Answer 1

1.

Budgeted Sales : 76,000

Desired Ending Inventory : 3,400 (68,000*5%)

Total Units Needed : 79,400

Beginning Inventory : (3,800) (76,000*5%)

Total Units to Produce: 75,600

2.

Budgeted Production : 75,600

Direct Materials (lbs) per unit produced : 3

Direct Materials needed for production : 226,800 (75,600*3)

Desired ending inventory for Direct Materials (lbs) : 41,640 [{68,000+(96,000*5%)-(68,000*5%)}*3*20%]

Total Direct Materials needed : 268,440

Beginning Inv. for Direct Materials : (45,360) (226,800*20%)

Budgeted Purchases of Direct Materials (lbs) : 223,080