Question

Ruiz Co. provides the following sales forecast for the next four months April MayJune July 810 Sales (units) 690 770 720 The company wants to end each month with ending finished goods inventory equal to 40% of next month's forecasted sales. Finished goods inventory on April 1 is 276 units. Assume July's budgeted production is 720 units. In addition, each finished unit requires five pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 40% of next month's production needs. Beginning raw materials inventory for April was 1,444 pounds. Assume direct materials cost $4 per pound

Answer 1

RUIZ CO.
Production budget
	April	May	June	July
Units to be sold	690	770	720	810
Desired Ending Finished Inventory	308	288	324	0
Total Units needed	998	1058	1044
Less : Beginning Finished Inventory	276	308	288	324
Units to be Produced	722	750	756	720

RUIZ CO.
Direct Materials Budget
For April, May, and June
	April	May	June
Budgeted production (units)	722	750	756	Units
Materials requirements per unit	5	5	5	lbs
Materials needed for production (lbs.)	3610	3750	3780
Budgeted ending inventory (lbs.)	1500	1512	1440*
Total materials requirements (lbs.)	5110	5262	5220
Beginning inventory (lbs.)	1444	1500	1512
Materials to be purchased (lbs.)	3666	3762	3708
Cost per lb.	$ 4.00	$ 4.00	$ 4.00	Per lb.
Total budgeted direct materials cost	$       14,664.00	$    15,048.00	$ 14,832.00

*Ending inventory of June = (720 x 5) x 40%