Mate Boomerang Corporation manufactures and sells plastic
boomerangs. Expected boomerang sales (in units) for the upcoming
months are as follows:
July |
Aug. |
Sept. |
Oct. |
Nov. |
Dec. |
|
Budgeted unit sales |
12,000 |
15,000 |
10,000 |
8,000 |
7,000 |
11,000 |
Mate likes to maintain a finished goods inventory equal to 10% of
the next month's estimated sales. Seven ounces of plastic resin are
needed to produce every boomerang. Mate likes to have enough
plastic resin on hand at the end of the month to cover 25% of the
next month's production requirements.
Required:
How many ounces of plastic resin should Mate plan on purchasing
during the month of October?
Solution (Please fill in the missing
information):
Production Budget:
October |
November |
December |
|
Budgeted unit sales |
8,000 |
7,000 |
11,000 |
Add desired ending finished goods inventory |
|
|
|
Total needs |
|||
Less beginning finished goods inventory |
|
|
|
Required production in units |
Problem 1 (continued)
Direct Materials Budget:
October |
November |
|
Required production in units |
||
Raw materials required per unit |
7 |
7 |
Raw materials needed to meet the production |
||
Add desired ending raw materials inventory |
|
|
Total raw materials needs |
||
Less beginning raw materials inventory |
|
|
Raw materials to be purchased |
Production budget
October | November | December | |
Expected sales | 8000 | 7000 | 11000 |
Add: Desired ending inventory | 700 | 1100 | |
Total needs | 8700 | 8100 | |
Less: Beginning inventory | -800 | -700 | |
Unit to be produced | 7900 | 7400 | |
Direct material budget
October | November | |
Required production in units | 7900 | 7400 |
Raw materials required per unit | 7 | 7 |
Raw materials needed to meet the production | 55300 | 51800 |
Add desired ending raw materials inventory | 12950 | |
Total raw materials needs | 68250 | |
Less: beginning raw materials inventory | -13825 | |
Raw materials to be purchased | 54425 | |
So answer is 54425 ounce
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