Question

Lubriderm Corporation has the following budgeted unit sales for the next six-month period:

Month Unit Sales

June 30,000

July 40,000

August 20,000

September 30,000

October 40,000

November 30,000

There were 9,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 30% of the unit sales for the next month.

Four pounds of materials are required for each unit produced. Each pound of material costs $10. Raw material inventory levels for materials are equal to 20% of the production needs for the next month. Materials inventory on July 1 was 29,600 pounds.

1. Prepare production budgets in units for July, August, and September.

B. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.

Answer 1

Lubriderm Corporation
Production Budget
For July, August and September
	July	August	September	October
Budgeted sales	40000	20000	30000	40000
Add: Desired Ending inventory	6000	9000	12000	9000
Total needs	46000	29000	42000	49000
Less: Beginning Inventory	(12000)	(6000)	(9000)	(12000)
Units to be produced	34000	23000	33000	37000

Lubriderm Corporation
Purchase Budget
For July, August and September
	July	August	September	October
Units to be produced	34000	23000	33000	37000
Materials required per unit	4	4	4	4
Materials needed in production	136000	92000	132000	148000
Add: Desired ending inventory	18400	26400	29600
Total required material	154400	118400	161600
Less: Beginning inventory	(29600)	(18400)	(26400)
Direct materials to be purchased	124800	100000	135200
Material to be purchased	10	10	10
Direct materials cost per unit	$ 1248000	$ 1000000	$ 1352000