Question

Current Attempt in Progress Pargo 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 1,900,000 units. Quarterly sales are 22%, 26%, 27% and 25%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $44 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 20% 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 first quarter of 2021 are 495,000 pounds. Prepare the sales, production, and direct materials budgets by quarters for 2020. PARGO COMPANY Sales Budget Quarter PARGO COMPANY Production Budget MacBook Air

Answer 1

Required budgets are as prepared below:

Pargo Company
Sales Budget
	Quarter
	1	2	3	4	Year
Expected Unit sales	418000	494000	513000	475000	1,900,000
Unit selling price	41	41	41	44
Total sales	17,138,000	20,254,000	21,033,000	20,900,000	79,325,000
Pargo Company
Production Budget
	Quarter
	1	2	3	4	Year
$//img.homeworklib.com/questions/f0d0ead0-72f0-11ea-834c-2745cf22b33d.gif?x-oss-process=image/resize,w_560$ Total sales	418,000	494,000	513,000	475,000	1,900,000
Desired Ending Finished Goods	98800	102600	95000	96140	96140
$//img.homeworklib.com/questions/f0d0ead0-72f0-11ea-834c-2745cf22b33d.gif?x-oss-process=image/resize,w_560$ Total Required volume	516,800	596,600	608,000	571,140	1,996,140
Beginning finished goods	83600	98800	102600	95000	83600
Total production	433,200	497,800	505,400	476,140	1,912,540
Pargo Company
Direct material Budget
	Quarter
	1	2	3	4	Year
Budgeted production	433,200	497,800	505,400	476,140	1,912,540
Raw material required for 1 unit	2	2	2	2	2
Total Raw material Required	866,400	995,600	1,010,800	952,280	3,825,080
Add: Ending Raw material	99,560	101,080	95,228	49,500	49,500
Less: Opening raw material	86,640	99,560	101,080	95,228	86,640
Total raw material purchase	879,320	997,120	1,004,948	906,552	3,787,940
Cost of 1 pound	10	10	10	10	10
Cost of Material purchased	8,793,200	9,971,200	10,049,480	9,065,520	37,879,400