Question

Show Attempt History Current Attempt in Progress On January 1, 2017, the Blue Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017. Sales units: First quarter 5,700; second quarter 6,200; third quarter 7,200 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: 7,670 units. The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017.4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.

Answer 1

Ans.	BLUE COMPANY
	Direct Materials Budget
	For Six Months
		Quarter
	Particulars	1	2	Six months
	Budgeted production (units)	5825	6450	12275
	(X) Materials requirement per unit	4	4	4
	Materials needed for production	23300	25800	49100
	Add: budgeted ending inventory	10320	12272	22592
	Total materials requirements	33620	38072	71692
	Less: Budgeted beginning inventory	-9320	-10320	-19640
	Materials to be purchased	24300	27752	52052
	(X) Direct materials per unit	$4.00	$4.00	$4.00
	Total budgeted direct materials	$97,200	$111,008	$208,208
	*Calculations for Ending inventory:			*Calculations for Beginning inventory:
Months				Months
Q 1	25,800 * 40%	10320		Q 1	(calculated as follows)	9320
Q 2	30,680 * 40%	12272		Q 2	Ending inventory of Q 1	10320
	*Beginning raw mateirals inventory for first quarter = Ending inventory of previous quarter = 40% of Q 1 material needs
	23,300 * 40%   = 9,320
	*Working Notes:
	*Calculations for Units produced and materials needed for production:
	Particulars	Quarter 1	Quarter 2	Quarter 3
	Expected units to be sold	5700	6200
	Add: Desired ending finished goods inventory units	1550	1800
	Total required units	7250	8000
	Less: Beginning inventory units	-1425	-1550
	Budgeted production (units)	5825	6450	7670
	(X) Materials requirement per unit	4	4	4
	Materials needed for production	23300	25800	30680
	*Ending inventory of second quarter = Units sales of third quarter * 25%
	7200 * 25%   = 1,800 units
	*Beginning inventory for first quarter = Ending inventory of previous quarter = 25% of current quarter's sales
	5,700 * 25% = 1,425 units