Question

company is preparing its budget for 2019. the company has collected the following information from the managers.

1. sales:

sales for November 2018 112,500 units

sales for the December 2018 102,100 units

Expected sales for January 2019 113,000 units

Expected sales for February 2019 112,500 units

Expected sales for March 2019 116,000 units

Expected sales for April 2019 125,000 units

Expected sales for May 2019 137,500 units

Selling price unit $12

The company likes to keep 15% of next months unit sales in ending finished goods inventory. all sales are on credit, 80% collected in the month of sale and 20% in the month after sale.

Accounts receivable on December 31, 2018 , totaled $170,000

2. Direct Material:

2 pounds of direct materials is needed to produce one unit. the company likes to keep 5% of the materials needed for the next month's production in it's raw material ending inventory. raw material on hand on December 31, 2018, totaled 10,000 pounds.Direct material cost is 5$ per pound. payment for material is made on credit ., 70% is paid in the month of purchase, and 30% is paid after the month of purchase.

Accounts payable on December 31, 2018, totaled

3. direct labor

labor requires. 5 hour per unit for completion and is paid at a rate of 10$ per hour.

required: Prepare the following for January & February 2019:

a) Production Budget

b) Direct material Purchase Budget in pounds and $

c) Schedule of expected cash payments for direct material purchase.

Answer 1

		Accounts Receivable on end December	$170,000
		Selling Price per unit	$12
		Ending Finished goods inventory in December	16950	(170000/12)
		Ending Finished goods inventory in January	16875	(15%*112500)
		Ending Finished goods inventory in February	17400	(15%*116000)
		PRODUCTION BUDGET
			Nov	Dec	Jan	Feb	March	April	May
	A	Sales in units	112,500	102,100	113,000	112,500	116,000	125,000	137,500
	B	Ending Finished Goods Inventory	15,315	16,950	16,875	17,400	18,750	20,625
	C	Beginning Finished Goods Inventory		15,315	16,950	16,875	17,400	18,750
	D=A+B-C	Budgeted Production in units		103,735	112,925	113,025	117,350	126,875
		Ending Raw Material inventory in December	10000
		Ending Raw Material inventory in January	11303	(5%*226050)
		Ending Raw Material inventory in February	11735	(5%*234700)
		DIRECT MATERIALS PURCHASE BUDGET
			Nov	Dec	Jan	Feb	March	April	May
	A	Budgeted Production in units		103,735	112,925	113,025	117,350	126,875
	B=A*2	Direct materials needed (Pounds)		207,470	225,850	226,050	234,700	253,750
	C	Ending Raw materials inventory(pounds)		10,000	11,303	11,735	12,688
	D	Beginning Raw Materials Inventory(Pounds)			10,000	11,303	11,735
	E=B+C-D	Budgeted Materials Purhase (Pounds)			227,153	226,483	235,653
	F	Raw material cost per pound			$5	$5	$5
	G=E*F	Budgeted materials Purhase (Dollars)			$1,135,763	$1,132,413	$1,178,263
		SCHEDULE OF PAYMENT FOR PURCHASE
			Nov	Dec	Jan	Feb	March	April	May
	A	Budgeted materials Purhase (Dollars)			$1,135,763	$1,132,413	$1,178,263
	B=A*70%	Payment for the months of purchase			$795,034	$792,689	$824,784
	C	Payment for previous months purchase			$340,000	$340,729	$339,724
	D=B+C	Budgeted Payment for purchase			$1,135,034	$1,133,418	$1,164,508
		Payment for January Purhase in February =30%*1135763=	$340,729
		Accounts Payable on December 31 assumed to be	$340,000	(This information is missing in the question)