Question

A small company in western Mexico, Boco Co., produces a very popular specialty vanilla extract that is used by many bakers. Each bottle of vanilla extract requires 4 grams of pure vanilla beans. The cost of the pure vanilla beans is $2.50 per gram. Budgeted production of the bottles of vanilla extract is given below by quarter:

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Budgeted production, in bottles	90,000	100,000	110,000	130,000

The company has decided it is necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of vanilla beans at the end of a quarter must be equal to 30% of the following quarter’s production needs.

Required:

Prepare a direct materials budget for pure vanilla beans for the first and second quarter for the upcoming year (you do not need a total column). At the bottom of your budget, show the dollar amount of the purchases for the quarter. Be sure to use the proper format which means to label the lines including a description of what that line is representing and what type of measurement (units, pounds, grams, liters, $,…). Include a title of the budget with the company name and date

Answer 1

X for first В Boco Co. direct materials budget for the first and second quarter first 90,000 second 100,000 budgeted production, in bottles units of vanilla beans needed per bottle (grams) units of vanilla beans needed to meet production (grams) add: Desired units of ending vanilla beans inventory (grams) total units of vanilla beans needed (grams) Less: units of beginning vanilla beans inventory (grams) units of vanilla beans to be purchased (grams) unit cost of vanilla beans ($) cost of vanilla beans to be purchased ($) 360,000 120,000 480,000 108,000 372,000 $ 2.50 $930,000 400,000 132,000 532,000 120,000 412,000 $ 2.50 $1,030,000

for formulas and calculations, refer to the image below -

X for first C D E second 100000 Boco Co. direct materials budget for the first and second quarter first budgeted production, in bottles 90000 units of vanilla beans needed per bottle (grams) units of vanilla beans needed to meet production (grams) =C6*C7 add: Desired units of ending vanilla beans inventory (grams) =D8*30% total units of vanilla beans needed (grams) =C8+C9 Less: units of beginning vanilla beans inventory (grams) =C8*30% units of vanilla beans to be purchased (grams) =C10-C11 unit cost of vanilla beans ($) 2.5 cost of vanilla beans to be purchased ($) =C12*013 =D6*D7 =110000*4*30% =D8+D9 =C9 =D10-D11 =D12*D13

In case you have any query, kindly ask in comments.