Question

Each unit requires five pounds of material X37. Roberts is planning raw materials needs for the second quarter. Inventory requirements are as follows: a. The finished goods inventory on hand at the end of each month must be equal to 4,000 units plus 31% of the next month’s sales. The finished goods inventory on March 31 is budgeted based on this requirement. b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month’s production needs for raw materials. The raw materials inventory on March 31 for material X37 is budgeted based on this requirement. c. The company maintains no work in process inventories. A sales budget for Roboto for the second and third quarters of the year follows. Budgeted Sales in Units April 39,000 May 49,000 June 69,000 July 34,000 August 19,000 September 9,000 Required: 1. Prepare a production budget for Roboto for the months April, May, June and July. 3. Prepare a direct materials budget showing the quantity of material X37 to be purchased for April, May, June and for the quarter in total?

Answer 1

Production Budget

	April	May	June	July
Sales in units	39,000	49,000	69,000	34,000
Add : Desired ending inventory units	19,190 [4,000+(49,000*31%)]	25,390 [4,000+(69,000*31%)]	14,540 [4,000+(34,000*31%)	9,890 [4,000+(19,000*31%)]
Less : Beginning inventory units	16,090 [4,000+(39,000*31%)]	19,190	25,390	14,540
Production in units	42,100	55,200	58,150	29,350

Direct materials budget

	April	May	June	Quarter
Production in units	42,100	55,200	58,150	155,450
Pounds of material required per unit	5	5	5	5
Pounds of material required for production	210,500	276,000	290,750	777,250
Add : Desired ending inventory	138,000 (276,000/2)	145,375 (290,750/2)	73,375 (29,350*5/2)	73,375
Less : Beginning inventory	105,250 (42,100*5/2)	138,000	145,375	105,250
Raw material to be purchased in pounds	243,250	283,375	218,750	745,375