Question

Smith 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 775 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 three 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 $0.20 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. Smith Manufacturing Production Budget For the Months of January through March January February Unit sales 3,100 3,200 Plus: Desired ending inventory 800 750 Total needed 3,900 3,950 775 Less: Beginning inventory 3,125 3,150 Units to produce Quarter 9,300 1,050 March 3,000 1,050 4,050 | 750 3,300 10,350 8009 775 9,575

Answer 1

Direct Material Budget
	Jan	Feb	Mar	Quarter
Unit to Be Produced	3125	3150	3300	9575
X Quantity of Direct Material needed per Unit	3	3	3	3
Quantity needed for Production (a)	9375	9450	9900	28725
Add: Desired Ending Inventory (b)	1890	1980	910	910
Quantity needed (a+b)	11265	11430	10810	29635

Working Note: For March Desired Ending Inventory
Sales in April:	4200
Add: Desired Ending Inventory : 4400*25%	1100
Less: Beg Inventory	-750
Production in April	4550
March Desired Ending Inventory (4550*20%)	910