Question

Required information Ruiz Co. provides the following sales forecast for the next four months: Sales (units) April 640 May 720 June 670 July 760 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 April 1 is 192 units. Assume July's budgeted production is 670 units. In addition, each finished unit requires four pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month's production needs. Beginning raw materials inventory for April was 797 pounds. Assume direct materials cost $3 per pound. Prepare a production budget for the months of April, May, and June. RUIZ CO. Production Budget For April, May, and June April Next month's budgeted sales (units) 720 Ratio of inventory to future sales 30% June May 670 760 Required units of available production Units to be produced

Answer 1

Solution

Ruiz Company
Production budget
For april may and june
	April	May	June
Next month Budgeted Sales	720	670	760
Ratio of inventory to future sales	30%	30%	30%
Budgeted Ending Inventory	216	201	228
Budgeted units sales for month	640	720	670
Required units of available production	856	921	898
Beginning Inventory	192	216	201
Units to be produced	664	705	697

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Ruiz Company
Direct material Budget
For april may and june
	April	May	June
Budgeted Production (unis)	664	705	697
Raw material required per unit (Lbs)	4	4	4
raw material needed for Production (lbs)	2,656	2,820	2,788
Budgeted Ending Inventory (lbs)	846	836	804*
Total material requirements (lbs)	3,502	3,656	3,592
Beginning Inventory (Lbs)	797	846	836
material to be Purchased (lbs)	2,705	2,810	2,756
Cost per lb.	$                  3.00	$               3.00	$                 3.00
Total budgeted direct material cost	$                8,116	$             8,431	$               8,267

*670 x 4 x 30%