Question

Croy Inc. has the following projected sales for the next five months: Month Sales in Units...

Croy Inc. has the following projected sales for the next five months:

Month Sales in Units
April 3,580
May 3,890
June 4,540
July 4,110
August 3,990

Croy’s finished goods inventory policy is to have 50 percent of the next month’s sales on hand at the end of each month. Direct materials costs $2.70 per pound, and each unit requires 2 pounds. Direct materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Direct materials on hand at March 31 totaled 3,735 pounds.

Required:

1. Determine budgeted production for April, May, and June.

2. Determine budgeted cost of materials purchased for April and May.

Business   Accounting   
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Answer #1

Part 1) Budgeted ptoduction for April, may and june

April May June
Sales(A) 3580 3890 4540
Ending inventory (B) 1945 2270 2055
Opening inventory(C) 1790 1945 2270
Budgeted production (A+ B - C) 3735 4215 4325

Part 2) Calculation of budgeted cost of materials purchased for April and may

April May
Current production 3580*2*2.7=19332 3890*2*2.7=21006
Ending inventory 1945*2*2.7=10503 2055*2*2.7=11097
- Opening inventory 3735*2.7=10085 10503
Budgeted cost of materials to be purchased 19750 21600
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