Question

Ruiz Co. provides the following sales forecast for the next four months. Sales (units) April 630 May 710 June 660 July 750 The company wants to end each month with ending finished goods inventory equal to 40% of next month's forecasted sales. Finished goods inventory on April 1 is 252 units. Prepare a production budget for the months of April, May, and June.

Answer 1

Answers

• [1]

Working		April	May	June
A	Next Month's budgeted sales (units)	710	660	750
B	Ratio of Inventory to future sales	40%	40%	40%
C = A x B	Desired ending Inventory	284	264	300
D	Budgeted sales units	630	710	660
E = C + D	Required Units of available production	914	974	960
F	Beginning inventory units of finished goods	252	284	264
G = E - F	Units to be produced	662	690	696

• [2]

	Direct Material Budget
	For April, May, and June
		April	May	June
A	Budgeted production (units)	632	660	666
B	Material required per unit (lbs)	5	5	5
C = A x B	Material needed for production	3160	3300	3330
D	Add: Desired ending inventory material	990	999	969
E = C+D	Total material requirements	4150	4299	4299
F	Less: Beginning material invemtory	948	990	999
G = E - F	Material needed to be purchased	3202	3309	3300
H	Material price per pound	$                    4.00	$                   4.00	$                 4.00
I = G x H	Budgeted cost of direct material purchases	$            12,808.00	$           13,236.00	$         13,200.00