Note: The company desires a minimum ending cash balance each month on $35,000. The beard grooming products are sold to retailers for $20 each and the sales have been stagnant due to the Covid-19. However, the marketing department has been positive toward the end of the year due to season change and upcoming holiday. The marketing department has just sent you their forecasted quarter sales and marketing budget.
Quarter |
2020 Q4 |
2021 Q1 |
2021 Q2 |
2021 Q3 |
2021 Q4 |
2022 Q1 |
Sales in Unit |
30,000 |
35,000 |
40,000 |
65000 |
68000 |
70,000 |
Marketing Expenses |
$35,000 |
$20,000 |
$20,000 |
$45,000 |
$45,000 |
$45,000 |
The increased sales volume before and during June and January is due to Father’s Day and holidays with AATB being a favorite. Ending finished goods inventories are supposed to be equal to 20% of the next month’s sales in units. AATB currently does its own assembly production in house. Each unit consists of 3 shaves and the cost of each is $1.50. Each unit needs 0.10 labour hour from assemble to finish package. The hourly pay rate to the assembling workers is $15 per hour. The production manager also required desired direct material ending inventory to 30% of the next quarter production.
Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | |
2020 | 2021 | 2021 | 2021 | 2021 | 2022 | |
Sales units | 30000 | 35000 | 40000 | 65000 | 68000 | 70000 |
Sales price per unit | 20 | 20 | 20 | 20 | 20 | 20 |
Total sales consideration | 600000 | 700000 | 800000 | 1300000 | 1360000 | 1400000 |
Marketing expense | 35000 | 20000 | 20000 | 45000 | 45000 | 45000 |
Inventory to be maintained | 7000 | 8000 | 13000 | 13600 | 14000 | 0 |
Production Required | 37000 | 36000 | 45000 | 65600 | 68400 | 56000 |
Direct Material ending inventory required | 32400 | 40500 | 59040 | 61560 | 50400 | 0 |
Direct Material required for current month | 111000 | 108000 | 135000 | 196800 | 205200 | 168000 |
Total direct material to be procured | 143400 | 116100 | 153540 | 199320 | 194040 | 117600 |
Cost per unit | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 |
Direct Material costs | 215100 | 174150 | 230310 | 298980 | 291060 | 176400 |
Labor hours | 3700 | 3600 | 4500 | 6560 | 6840 | 5600 |
Cost per hour | 15 | 15 | 15 | 15 | 15 | 15 |
Direct Labor costs | 55500 | 54000 | 67500 | 98400 | 102600 | 84000 |
Inventory to be maintained | =next quarter's sales * 20% |
Production required | =Closing inventory to be aintained + Current month's demand-opening inventory |
Direct material ending inventory | =Next quarter's production *30% * 3 units per product |
Direct Material for current month prodction | =production required * 3 units per product |
Direct Material prcured | =Closing inventory to be maintained + current month's requirement-opening inventory |
Labor hours required | =production required * 0.10 per product |