Question

solve this problem please.

[LO 10-4) 10-25 Production and Materials Purchases Budgets White Corporation's budget calls for the fol- lowing sales for next year: Quarter 1 Quarter 2 90,000 units 76,000 units Quarter 3 Quarter 4 68,000 units 96,000 units Each unit of the product requires 3 pounds of direct materials. The company's policy is to begin each quarter with an inventory of product equal to 5% of that quarter's estimated sales requirements and an inventory of direct materials equal to 20% of that quarter's estimated direct materials require- ments for production. Required Determine the production and materials purchases budgets for the second quarter.

Answer 1

White Corporation Production Budget Budgeted sales (units) Add: Desired ending F.G. inventory Required units available for sale Less: Beginning F.G. inventory Units to be produced (Here, F.G. stands for Finished Goods) White Corporation Raw Materials Budget Quarter-2 76,000 3,400 [5% of Quarter-3's sales = 68000 units x 5% = 3400] Workings: 79,400 Quarter-1 -3,800 [5% of Quarter-2's sales = 76000 units x 5% = 3800] Budgeted sales (units) 90,000 75,600 Add: Desired ending F.G. inventory 3,800 [5% of Quarter-2's sales = 76000 units x 5% = 3800] Required units available for sale 93,800 Less: Beginning F.G. inventory -4,500 [5% of Quarter-1's sales = 90000 units x 5% = 4500] Units to be produced 89,300 Materials required per unit (pound) 3 Quarter-2 Materials needed in production 267,900 [89300 units x 3 pounds] 75,600 [Ref: Production budget] Desired ending inventory % 20% of Quarter-1's materials needed in production 3 Desired ending inventory pounds 53,580 [267900 pounds x 20%] 226,800 (75600 units x 3 pounds] 45,360 [20% of Quarter-2's materials needed = 226800 pounds x 20% = 45360 pounds] 272,160 -53,580 [Ref: Workings] 218,580 Budgeted production (units) Materials required per unit (pound) Materials needed in production Add: Desired ending invent. (pound) Total materials requirement Deduct: Beginning invent. (pound) Materials to be purchased (pound)