Question

Croy Inc. has the following projected sales for the next five months:   

Month	Sales in Units
April	3,480
May	3,925
June	4,590
July	4,165
August	3,950

Croy’s finished goods inventory policy is to have 70 percent of the next month’s sales on hand at the end of each month. Direct material costs $3.40 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,792 pounds.     

1. Determine budgeted production for April, May, and June. (Do not round your intermediate calculations and round your final answer to the nearest whole number.)

2. Determine the budgeted cost of materials purchased for April, May, and June. (Use rounded Budgeted Production units in intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Answer:

Firstly we would answer to point 2 of the requirement. This would help us in answering point 1 of the requirement.

Point 2:Budgeted Cost of materials purchased for April, May & June

Particulars	April	May	June
	(in units)	(in units)	(in units)
Opening Stock	1,896.00	2,436.00	2,747.50
(Previous month's closing stock is Opening stock for next month) Opening Stock for April in units = 3792 pounds of closing inventory / 2 pounds per unit
Add: Purchases (Closing stock + Sales - Opening Stock)	4,020.00	4,236.50	5,055.50
Less: Sales (Given)	3,480.00	3,925.00	4,590.00
Closing Stock	2,436.00	2,747.50	3,213.00
(70% of next months's sales)	(70% of 3480)	(70% of 3925)	(70% of 4590)

Particulars	April	May	June
Units to be purchased (in units)	4,020.00	4,236.50	5,055.50
Each unit requires 2 pounds. (So, pounds to be purchased = Units to be purchased X 2) (Amount in Pounds)	8,040.00	8,473.00	10,111.00
Direct Cost for each pound (Given - Amount in $)	3.40	3.40	3.40
Cost of Materials (Total Amount in $)	27,336.00	28,808.20	34,377.40

Answer to Point 1: Budgeted Production for April, May & June

Particulars	April	May	June
	(in units)	(in units)	(in units)
Opening Stock (as calculated in Point 2)	1,896.00	2,436.00	2,747.50
Add: Purchases (as calculated in Point 2)	4,020.00	4,236.50	5,055.50
Less: Closing Stock (as calculated in Point 2)	2,436.00	2,747.50	3,213.00
Units Produced (Opening Stock + Purchases - Closing Stock) (Rounded off)	3,480	3,925	4,590

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