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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 product requires 3 pounds of direct materials. The companypolicy is to begin each quarter with an inventory of product equla to 5% of that quater's estimaged sales requirements and an inventory of direct materials equal to 20% of that quarter’s estimated direct materials requirements for production.

Required:
Determine the production and materials purchases budgets for the second quarter.

Respuesta :

Solution :

Production Budget                                 Quarter 2                   Quarter 3

Sales                                                          76000                       68000

Add:desired closing inventory                 3400                          4800

Less: opening inventory                           3800                           3400

Production budget                                   75600                         69400

Material Budget                                   Quarter 2

Consumption                                    226800  (3 units x 75600)

Add:desired closing inventory        41640   (20% of the subsequent quarter)

   (69400 x 3 x 0.20)

Less:opening inventory                    45360   (20% of the current quarter)

Raw material to be purchased         223080

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