Question

Stenback Manufacturing produces self-watering planters for use in upscale retail establishments. Sales projections for the first five months of the upcoming year show the estimated unit sales of the planters each month to be as follows: (Click the icon to view additional information.) Inventory at the start of the year was 800 planters. The desired inventory of planters at the end of each month should be equal to 25% of the following month's budgeted sales. Each planter requires two pounds of polypropylene (a type of plastic). The company wants to have 20% of the polypropylene required for next month's production on hand at the end of each month. The polypropylene costs $0.10 per pound. Read the requirements. Requirement 1. Prepare a production budget for each month in the first quarter of the year, including production in units for each month and for the quarter. Stenback Manufacturing Production Budget For the Months of January through March January February March Quarter Unit sales Plus: Desired ending inventory Total needed Less: Beginning inventory Units to produce Requirement 2. Prepare a direct materials budget for the polypropylene for each month in the first quarter of the year, including the pounds of polypropylene required and the total cost of the polypropylene to be purchased Start by preparing the direct materials budget through the total quantity needed, then complete the budget. March Quarter Stenback Manufacturing Direct Materials Budget For the Months of January through March January February Units to be produced Multiply by: Quantity of direct materials needed per unit Quantity needed for production Plus: Desired ending inventory of direct materials Total quantity needed

Answer 1

Requirement 1. Stenback Manufacturing Production Budget for the months of January through March January February March Quarter Unit sales 3200 3000 3500 9700 Plus: Desired ending inventory 750 875 1075 1075 Total needed 3950 3875 4575 10775 Beginning Inventory 800 875 800 Units to produce 3150 3125 3700 9975 Less: 750 Quarter 9,975 Requirement 2. Stenback Manufacturing Direct Material Budget for the months of January through March January February March Units to be produced 3,150 3,125 3,700 Muliply by: Qty of direct mat needed per unit - 2 2 2 Qty needed for production 6,300 6,250 7,400 Plus: Desired ending Inventory of material 1,250 1,480 1,750 Total Qty needed 7,550 7,730 9,150 Less: Beginning Inventory of direct material 1,250 1,480 Quantity to purchase 7,550 6,480 7,670 Multiply by: Cost per pound $ 0.10 $ 0.10 $ 0.10 Total cost of direct material purchases $ 755.00 $ 648.00 $ 767.00 19,950 1,750 21,700 21,700 $ 0.10 $ 2,170.00 Note : Opening Inventory of polypropylene is assumed as O as no information was available

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