Question

Mate Boomerang Corporation manufactures and sells plastic boomerangs. Expected boomerang sales (in units) for the upcoming...

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
(25% × _____________)



Total raw materials needs

Less beginning raw materials inventory
(25% × _____________)



Raw materials to be purchased

Homework Answers

Answer #1

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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