Question

Ch 20, 218 22 Help Required information Ruiz Co. provides the following sales forecast for the next four months Sales (units) April 580 May 660 June 610 July 700 The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on Aprilis 174 units. Assume July's budgeted production is 610 units. In addition, each finished unit requires six pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 20% of next month's production needs. Beginning raw materials inventory for April was 725 pounds. Assume direct materials cost $4 per pound. Prepare a production budget for the months of April, May, and June RUIZ CO. Production Budget For April, May, and June April May June Next month's budgeted sales (units) 660 610 700 < Prev 21 22 a 27 Next >

Answer 1

Answer -

1. Answer -

Ruiz Co.
Production Budget
For April, May, and June
	April	May	June
Next month's budgeted sales (units)	660	610	700
Ratio of inventory to future sales	30%	30%	30%
Budgeted ending inventory (units)	198	183	210
Budgeted unit sales for month	580	660	610
Required units of available production	778	843	820
Budgeted beginning inventory (units)	174	198	183
Units to be produced	604	645	637

Calculation:

1. Budgeted ending inventory:

April:

= Next month’s budgeted sales (units) * Ratio of inventory to future sales

= 660 units * 30%

= 198 units

May:

= Next month's budgeted sales (units) * Ratio of inventory to future sales

= 610 units * 30%

= 183 units

June:

= Next month's budgeted sales (units) * Ratio of inventory to future sales

= 700 units * 30%

= 210 units

2. Required units of available production:

April:

= Budgeted ending inventory + Budgeted unit sales for month

= 198 units + 580 units

= 778 units

May:

= Budgeted ending inventory + Budgeted unit sales for month

= 183 units + 660 units

= 843 units

June:

= Budgeted ending inventory + Budgeted unit sales for month

= 210 units + 610 units

= 820 units

3. Units to be produced:

Budgeted beginning inventory for month = Budgeted ending inventory for previous month

For April, budgeted beginning inventory = 174 units (given)

April:

= Required units of available production - Budgeted beginning inventory (units)

= 778 units - 174 units

= 604 units

May:

= Required units of available production - Budgeted beginning inventory (units)

= 843 units - 198 units

= 645 units

June:

= Required units of available production - Budgeted beginning inventory (units)

= 820 units - 183 units

= 637 units

2. Answer -

Ruiz Co.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted production (units)	604	645	637	units
Materials requirements per unit	6	6	6	lbs.
Materials needed for production (lbs.)	3624	3870	3822	lbs.
Budgeted ending inventory (lbs.)	774	764	732	lbs.
Total materials requirements (lbs.)	4398	4634	4554	lbs.
Beginning inventory (lbs.)	725	774	764	lbs.
Materials to be purchased (lbs.)	3673	3860	3790	lbs.
Cost per lb.	$4	$4	$4	per lb.
Total budgeted direct materials cost	$14692	$15440	$15160

Calculation:

As per given information,

Materials requirements per unit = 6 lbs.

Ratio of budgeted ending inventory = 20% of next month’s production needs

Cost per lb. = $4 per lb.

Budgeted production for July = 610 units

1. Materials needed for production:

April:

= Budgeted production * Materials requirements per unit

= 604 units * 6 lbs.

= 3624 lbs.

May:

= Budgeted production * Materials requirements per unit

= 645 units * 6 lbs.

= 3870 lbs.

June:

= Budgeted production * Materials requirements per unit

= 637 units * 6 lbs.

= 3822 lbs.

July:

= Budgeted production * Materials requirements per unit

= 610 units * 6 lbs.

= 3660 lbs.

2. Budgeted ending inventory:

April:

= Materials needed for production for month of May * 20%

= 3870 lbs. * 20%

= 774 lbs.

May:

= Materials needed for production for month of June * 20%

= 3822 lbs. * 20%

= 764 lbs.

June:

= Materials needed for production for month of July * 20%

= 3660 lbs. * 20%

= 732 lbs.

3. Total materials requirements:

April:

= Materials needed for production + Budgeted ending inventory

= 3624 lbs. + 774 lbs.

= 4398 lbs.

May:

= Materials needed for production + Budgeted ending inventory

= 3870 lbs. + 764 lbs.

= 4634 lbs.

June:

= Materials needed for production + Budgeted ending inventory

= 3822 lbs. + 732 lbs.

= 4554 lbs.

4. Materials to be purchased:

Beginning inventory for month = Ending inventory for previous month

For April, beginning inventory = 725 lbs. (given)

April:

= Total materials requirements - Beginning inventory

= 4398 lbs. - 725 lbs.

= 3673 lbs.

May:

= Total materials requirements - Beginning inventory

= 4634 lbs. - 774 lbs.

= 3860 lbs.

June:

= Total materials requirements - Beginning inventory

= 4554 lbs. - 764 lbs.

= 3790 lbs.

5. Total budgeted direct materials cost:

April:

= Materials to be purchased * Cost per lb.

= 3673 lbs. * $4 per lb.

= $14692

May:

= Materials to be purchased * Cost per lb.

= 3860 lbs. * $4 per lb.

= $15440

June:

= Materials to be purchased * Cost per lb.

= 3790 lbs. * $4 per lb.

= $15160