Gregor Company is preparing a budget to determine the amount of part G12 to produce for the first quarter of the year, and the amount of resin to purchase for part G12. The company desires to have 30% of the next month's estimated sales of G12 in inventory at the end of each month. Gregorhas a very reliable supplier of resin and therefore desires an ending inventory of only 10% of resin needs for the next month's production. Each unit of G12 requires three quarter of a three quarter of a
pound of resin. Projected sales of G12 for January, February, and March are 50,000 units, 100,000 units, and 60,000 units, respectively.
Requirements
|
(a) |
How many units of part G12 will Gregor budget to produce in January and February? |
|
(b) |
How many pounds of resin will
Gregor budget to purchase in January? |
Homework Answers
1.
| January | Feb | |
| Sales (given) | 50,000.00 | 100,000.00 |
| Add: Closing stock (30% of next month sales) | 100000*30% = 30,000.00 | 60000*30%= 18,000.00 |
| Units needed | 80,000.00 | 118,000.00 |
| Less: Opening Stock | 50000*30% = 15,000.00 | 30,000.00 |
| Units to be Produced | 65,000.00 | 88,000.00 |
Opening balance of January is closing balance for December. This is nothing but 30% of the next month sale ie 30% of January sales. Hence it is 50,000*30%.
a. Hence Gregor Company budgets to produce 65000 units in Jan and 88000 units in Feb.
2.
| January | |
| Units to be Produced | 65000 |
| Qty of Resin Reqd for product in the current month (65000 * 3/4) | 48750 |
| Add: Closing Stock (10% of next month's resin needed for production) (ie., 88000*3/4*10%) | 6600 |
| 55350 | |
| Less: Opening Stock (10% of current month production) | 4875 |
| Units to be purchased | 50475 |
b. Hence, gregor company has to purchase 50475 pounds of Resin in January.
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