Question

Information about Roboto, a product sold by Roberts, Inc. is as follows: Each unit requires four 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 3,000 units plus 32% 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	50,000
May	60,000
June	80,000
July	45,000
August	30,000
September	20,000

  

Required:
1.	Prepare a production budget for Roboto for the months April, May, June and July.

     

2.

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
Particulars	April	May	June	July
Closing Inventory at end of month	3000+(60000*32%)	3000+(80000*32%)	3000+(45000*32%)	3000+(30000*32%)
	22,200	28,600	17,400	12,600
Opening Inventory	3000+(50000*32%)	3000+(60000*32%)	3000+(80000*32%)	3000+(45000*32%)
	19,000	22,200	28,600	17,400
Sales	50,000	60,000	80,000	45,000
Production (Closing Inventory + Sales - Opening Inventory	53,200	66,400	68,800	40,200
Direct Material Budget
Particulars	April	May	June
Closing raw material	(66400*4)*50%	(68800*4)*50%	(40200*4)*50%
	132,800	137,600	80,400
Opening raw material	(53200*4)*50%	(66400*4)*50%	(68800*4)*50%
	106,400	132,800	137,600
Usage	53200*4	66400*4	68800*4
	212,800	265,600	275,200
Purchase (Closing stock + Usage - Opening stock	239,200	270,400	218,000