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.

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

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

Answer 1

		production budget
					second		third
sale units					76,000		68,000
Add:Ending inventory		(5% of next qtr sales)			3400		4800
total needs					79,400		72,800
less:beginning invnetory					3800		3,400
production required					75,600		69,400
		Materials purchase budget
					second		third
Budgeted production					75,600		69,400
direct materials lbs per unit					3		3
direct materials needed for production					226800		208200
desired ending inventory			(208200*20%)		41640
total direct materials needed					268440
beginning inventory					45360
budgeted purchase of direct materials					223080