Question

On January 1, 2020, the Johnson Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.

Sales Units: First quarter 5,600; second quarter 6,400; third quarter 7,000

Ending raw materials inventory: 40% of the next quarter's production requirements.

Ending finished goods inventory: 25% of the next quarter's expected sales units.

Third-quarter production: 7,440 Units

The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.

-Prepare a production budget by quarters for the 6-month period ended June 30, 2020:

Quarter 1 Quarter 2 Six Months

_________________________________________________________________________________________________________________________________________________

Expected unit sales

Add: Desired ending finished goods

Total required units

Less: Beginning finished goods unit

Required production units

-Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020:

Quarter 1 Quarter 2 Six Months

____________________________________________________________________________________________________________________________________________

Units to be produced

Direct materials per unit

Total pounds needed for production

Add: Desired ending direct materials (pounds)

Total materials required

Less: Beginning direct materials (Pounds)

Direct materials purchases

Cost per pound

Total cost of direct materials purchases

Answer 1

Solution:

Johnson Company
Production Budget
For the first six months
	Quarter 1	Quarter 2	Six months
Expected unit sales	5600	6400	12000
Add: Desired ending finished goods (25% of next quarter sales)	1600	1750	1750
Total required units	7200	8150	13750
Less: Beginning finished goods unit	1400	1600	1400
Required production units	5800	6550	12350

Johnson Company
direct materials budget
For the first six months
	Quarter 1	Quarter 2	Six months
Units to be produced	5800	6550	12350
Direct materials per unit	5	5	5
Total pounds needed for production	29000	32750	61750
Add: Desired ending direct materials (40% of next quarters production req.))	13100	14880	14880
Total materials required	42100	47630	76630
Less: Beginning direct materials (Pounds)	11600	13100	11600
Direct materials purchases	30500	34530	65030
Cost per pound	4	4	4
Total cost of direct materials purchases	122000	138120	260120