Jupiter Company's budget for the coming year estimates monthly sales in units for the first five...
Jupiter Company's budget for the coming year estimates monthly sales in units for the first five months of the year as follows: April, 35,000; May, 38,000; June 40,000; July, 39,000; and August, 38,000.
The ending inventory of finished units available for sale is to be maintained at 25% of the next month's estimated sales. On April 1, there were 12,000 units on hand. There is no work in process at the end of any month. Each unit of finished product requires the use of five units of materials.
Materials are to be carried in inventory in an amount equal to one-third of the expected production of the coming month. Beginning inventory on April 1 of the current year was 54,167 units of material.
a. Prepare a production budget (in units) for the first four months of the period. Round amounts
to the nearest unit.
b. Prepare a materials purchases budget (in units of materials) for the second quarter of the
coming year. Round amounts to the nearest unit.
Homework Answers
Answer-a)-
| JUPITER COMPANY | |||||
| PRODUCTION BUDGET | |||||
| FOR THE FIRST FOUR MONTHS | |||||
| Particulars | April | May | June | July | Total |
| Estimated sales (a) | 35000 | 38000 | 40000 | 39000 | 152000 |
| Add:- Desired ending finished goods inventory (b) | 38000*25%=9500 | 40000*25%=10000 | 39000*25%=9750 | 38000*25%=9500 | 38750 |
| 25% of the next month's sales needs | |||||
| Less:-Opening finished goods inventory (c) | 12000 | 9500 | 10000 | 9750 | 41250 |
| Number of units to be produced (d=a+b-c) | 32500 | 38500 | 39750 | 38750 | 149500 |
b)-
| JUPITER COMPANY | ||||
| DIRECT MATERIALS PURCHASES BUDGET | ||||
| FOR THE PERIOD ENDED SECOND QUARTER | ||||
| Particulars | APRIL | MAY | JUNE | Year |
| Required production in units of finished goods (a) | 32500 | 38500 | 39750 | 110750 |
| Units of raw material required per units of finished goods (b) | 5 | 5 | 5 | 5 |
| Units of raw material needed to meet production a*b=(c) | 162500 | 192500 | 198750 | 553750 |
| Add:- Desired units of ending raw material inventory | 192500*1/3=64167 | 198750*1/3=66250 | 193750*1/3=64583 | 195000 |
| Total units of raw material needed | 226667 | 258750 | 263333 | 748750 |
| Less:-Units of opening raw material inventory | 54167 | 67167 | 66250 | 187584 |
| Units of raw material to be purchased (d) | 172500 | 191583 | 197083 | 561166 |
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