Question

Cullumber Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 18%, 26%, 23%, and 33%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 15% higher than the budgeted sales for the first quarter of 2020.

Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume.

Direct materials. Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for the first quarter of 2021 are 504,000 pounds.

Prepare the sales, production, and direct materials budgets by quarters for 2020.

CULLUMBER COMPANY Sales Budget For the Year Ending December 31, 2020 Quarter Year Expected Unit Sales 2000000 Unit Selling Price : Total Sales 19760000 17480000 29700000 80620000 CULLUMBER COMPANY Production Budget For the Year Ending December 31, 2020 Quarter Year Expected Unit Sales 360000 660000 103500 d. Desired Ending Finished Goods Units 490000 T 763500 Total Required Units Tless Beginning Finished Goods Units Required Production Units 2 165000 400000 50 510000 598500 T 2013500

Answer 1

Answer- CULLUMBER COMPANY

Direct Material Budget

For the Year Ending December 31,2020

	1	2	3	4	Year
Units to be Produced	400,000	505,000	510,000	598,500
Direct Materials Per Unit	2	2	2	2
Total Pounds Required for Production	800,000	1,010,000	1,020,000	1,197,000
Add: Desired Ending Direct Materials (Pounds)	101,000	102,000	119,700	50,400
Total Materials Required	901,000	1,112,000	1,139,700	1,247,400
Less: Beginning Direct Materials (Pounds)	80,000	101,000	102,000	119,700
Direct Materials Purchases	821,000	1,011,000	1,037,700	1,127,700
Cost per Pound	$10	$10	$10	$10
Total Cost of Direct Materials Purchases	$8,210,000	$10,110,000	$10,377,000	$11,277,000	$39,974,000