Question

Managerial Accounting

Benliver, Inc. manufactures and distributes a number or products to retailers. One of these products, Super Jetdry, requires two pounds of material R2D8 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter - July, August, and September. Peak sales of Super Jetdry occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements: a. b. The finished goods inventory on hand at the end of each month must be equal to 3,000 units plus 20% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 12,600 units. The raw materials inventory on hand at the end of the month must be equal to 40% of the following month's production needs for raw materials. The raw materials inventory on June 30 for material R2D8 is budgeted to be 40,320 pounds. The cost per pound of raw material is $3.50. The company maintains no work in process inventories and the selling price per unit of Super Jetdry is $47.50. A sales budget for Super Jetdry for the last six months of the year follows: c. July August September October November December Budgeted Sales in Units 48,000 60,000 75,000 40,000 30,000 20,000 a. Prepare a sales budget for Super Jetdry for the months of July, August, and September, and the quarter in total. Prepare a production budget for Super Jetdry for the months of July, August, and September and the quarter in total. c. Prepare a direct material purchases budget showing the quantity and cost of material R2D8 to be purchased for July, August, and September and for the quarter in total. July August September Quarter Sales Budget Sales in units Price Total Sales Revenue Production Budget Sales in units Ending Inventory Needed Beginning Inventory Units to be produced Direct Materials Purchases Production in units Pounds Required Ending Inventory Needed Beginning Inventory Purchases

Answer 1

Answer

a) Sales Budget

	July	August	September	Quarter
Sales in Unit	48,000	60,0000	7,5000	1,83,000
Selling Price	$47.50	$47.50	$47.50	$47.50
Total Sales	$22,80,000	$28,50,000	$35,62,500	$86,92,500

b) Production Budget

	July	August	September	Quarter
Sales In unit	48,000	60.000	75.000	1,83,000
Add: Ending Inventory	15,000	18,000	11000	44,000
	(3000+20% of 60,000)	(3,000+20% of75,000)	(3000+20% of 40,000)
Needed	63,000	78,000	86,000	2,27,000
Less: Beginning Inventory	12,600	15,000	18,000	45,600
Unit To be Produced	50,400	63,000	68,000	1,81,400

C) Direct Material Purchase Budget

	July	Auguest	Septumber	Quarter
Unit to be produced	50,400	63,000	68,000	1,81,400
Ponds	1,00,800	1,26,000	1,36,000	3,62,000
	(50400*2*)	(63,000*2)	68,000*2)	(1,81,400*2)
Ending Inventory ($0%of next month production)	50,400	54,400	30,400**	1,35,200
Needed	151200	180400	1,66,400	4,97,200
Beginning Inventory	40,320	50,400	54,400	1,45,120
Purchases	110880	130000	112000	351880

Purchase cost

	July	Auguest	September	Quarter
Purchase Ponds	110880	120000	112000	351880
Purchase rate per pond	$3.5	$3.5	$3.5	$3.5
Purchase Cost	$3,88,080	$4,20,000	$3,92,000	$12,31,580

* means every 1 Unit of Finesh goods required 2 Ponds of raw material

calculation production required in July is 50,400 Opening stock required 40 % of Next month production that is 20160 clossing stock of june is 40,320/- means is 40320/20160 = 2 ponds

** Calculation of Opening Stock of Sept.

Calculation of Production of Oct. = sales + clossing Stock - Openig Stock

=40,000+3,000+20%of 30,000( Nov sales)-11000

=38000 units

Raw Material Required = 38000*2 = 76,000

Openig Stock is 30,400/-( 76,000 *40%)