Question

Prepare production and direct b e rs for 59.6 (LO2), AP On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020. Sales units: First quarter 5,000, second quarter 6,000, third quarter 7,000. Ending raw materials inventory: 40% of the next quarter's production requirements. Ending finished goods inventory: 25% of the next quarter's expected sales units. Third-quarter production: 7,200 units. The ending raw materials and finished goods inventories at December 31, 2019. follow the same percent age relationships to production and sales that occur in 2020. Three pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound Instructions a. Prepare a production budget by quarters for the 6-month period ended June 30, 2020. b. Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020

Answer 1

Hardin Company Production Budget For the Six Months Ending June 30, 2020 Answer Quarter 1 3 Expected Unit Sales Add: Desired ending FG units 5,000 6,000 7,000 1,750 1,500 Total Required Units 6,500 7,750 Less: Beginning FG units 1,250 1,500 Required Production Units Desired Ending FG units 5,250 6,250 7,200 Beginning FG units Quarter 1 6,000 x 25% = 1,500 units Quarter 1 5,000 x 25% 1,250 units Quarter 2 7,000 x 25% = 1,750 units Quarter 2 6,000 x 25% 1,500 units

Hardin Company Direct Materials Budget For the Six Months Ending June 30, 2020 Quarter Six Months 1 Units to be Produced (a) Direct Materials per unit (b) Total Pounds needed for Production [(a) x (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 Desired Ending Raw Materials 5,250 6,250 7,200 15,750 18,750 21,600 7,500 8,640 23,250 27,390 6,300 7,500 16,950 19,890 $4 $4 $67,800$79,560$147,360 Beginning Raw Materials Quarter 1 18,750 x 40% 7,500 Quarter 1 15,750 x 40% 6,300 Quarter 2 21,600 x 40% 8,640 Quarter 2 18,750 x 40% 7,500