Question

On January 1, 2020, the Cullumber Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.

Sales units:		First quarter 5,700; second quarter 6,100; third quarter 7,400.
Ending raw materials inventory:		40% of the next quarter’s production requirements.
Ending finished goods inventory:		25% of the next quarter’s expected sales units.
Third-quarter production:		7,850 units.

The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.

Prepare a production budget by quarters for the 6-month period ended June 30, 2020. CULLUMBER COMPANY Production Budget Quarter Six Months 1 2 <

Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020.

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

d

6 Six Months 1 Answer 2 Part 1) 3 CULLUMBER COMPANY 4 Production Budget 5 For the Half Year Ended June 30, 2020 Quarter 7 1 2 8 Sales 5700 6100 9 Add desired ending inventory 1525 1850 10 (6100*25%) (7400*25%) 11 Total production units required 7225 7950 12 Less Beginning inventory 1425 1525 13 Units to be produced 5800 6425 11800 1850 13650 1425 12225 14

4 5 Part 2) 6 7 CULLUMBER COMPANY Direct Material Budget For the Half Year Ended June 30, 2020 Quarter 8 9 Six Months 0 1 2 5800 6425 12225 4 4 4 25700 48900 23200 10280 12560 1 Units to be produced 2 Direct Material per unit 3 Total direct material need for production 4 Add desired direct material inventory 5 6 Total quantity of direct material required 7 Less beginning direct material inventory 8 Total Units to be purchased 9 Cost Per Pound 0 Direct Material Purchases 12560 (7850*4*40%) 38260 10280 61460 33480 9280 9280 24200 27980 52180 5 5 5 121000 139900 260900 1 2 For any other help please comment in the comment box 3 Thank You 4