Question

Exercise 23-8 Fuqua Company's sales budget projects unit sales of part 1987 of 11,000 units in January, 12,600 units in February, and 14,000 units in March. Each unit of part 1982 requires 3 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month's production requirements, and its ending finished goods inventory to equal 20% of the next month's expected unit sales. These goals were met at December 31, 2016. Prepare a production budget for January and February 2017. FUQUA COMPANY Production Budget January February

Answer 1

Answer FUQUA COMPANY Production Budget For the Two Months Ending February 28, 2017 January February Expected Unit Sales 11,000 12,600 Add: Desired Ending Finished Goods Inventory 2,520 2,800 Total Required Units 13,520 15,400 Less: Beginning FG units 2,200 2,520 Required Production Units 11,320 12,880 Desired Ending FG units Beginning FG units January = 12,600 x 20% = 2,520 units January = 11,000 x 20% = 2,200 units February = 14,000 x 20% = 2,800 units February = 12,600 x 20% = 2,520 units

FUQUA COMPANY Direct Materials Budget For the Months Ending January 31, 2017 January 11,320 Units to be Produced (a) Direct Materials per unit (b) Total Pounds needed for Production [(a) (b)] Add: Desired Ending Direct Materials (lbs) Total materials required Less: Beginning Direct Materials Direct Materials Purchases Cost per Pound Total cost of Direct Materials Purchase 33,960 15,456 49,416 13,584 35,832 $3 $107,496 Desired Ending Raw Materials January = (12,880 x 3) x 40% = 15,456 units Beginning Raw Materials January = (11,320 x 3) x 40% = 13,584 units