Question

Prepare the sales, production, and direct material budgets by quarters for 2020. American Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, direct materials budgets are as follows: Sales: Sales for the year are expected to total 1,200,000 units Quarterly sales are 20%, 25%, 30%, and 25% respectively. The sales price is expected to be $ 50 per units for the first three quarters and $55 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 10 % higher than the budgeted sales for the first quarter of 2020. Production: Management desires to maintain the ending finished goods inventories at 25% of the next quarter's budgeted sales volume. Direct materials: Each unit require 3 pounds of raw materials at a cost $ 5 per pound. Management desires to maintain raw materials inventories at 5% of the next quarter's production requirements. Assume the production requirements for the first quarter of 2021 are 820,000 pounds.

Answer 1

Answer is given below

Sales Budget Budgeted Units to be sold Sales price per tire Total Sales Quarter Quarter II Quarter III Quarter IV Full year 240,000 300,000 360,000 300,000 1,200,000 $50 $12,000,000 $15,000,000 $18,000,000 $16,500,000 $61,500,000 $50 $50 $55 Production Budget - Units | Quarter Budgeted Unit sales 240,000 Add: Desired Closing inventory ( 25% of next Quarter) 75,000 Total Needs 315,000 Less Opening Stock 60,000 Total Production in units T 255,000 Quarter IV Closing stock 25% of 264,000 units ( 240,000 units +10%) Quarter II 300,000 90,000 390,000 75,000 315,000 Quarter III 360,000 75,000 435,000 90,000 345,000 Quarter IV 300,000 66,000 366,000 75,000 291,000 Full year | 1,200,000 66,000 1,266,000 60,000 1,206,000 Purchase Budget - Units | Quarter 255,000 Quarter II 315,000 Quarter III 345,000 Quarter IV 291,000 Full year 1,206,000 Budgeted Production Units needed per output of production Budgeted Units needed for production Add: Desired Closing inventory (5% of next Quarter) Total Needs Less Opening Stock Budgeted Production ( In Units) Purchase price per unit Budgeted Purchase ( Value) 765,000 47,250 812,250 38,250 774,000 945,000 51,750 996,750 47,250 949,500 1,035,000 43,650 1,078,650 51,750 1,026,900 873,000 41,000 914,000 43,650 870,350 3,618,000 41,000 3,659,000 38,250 3,620,750 S5 5 $5/ $3,870,000 $4,747,500 $5,134,500 $4,351,750 $18,103,750 Quarter IV Closing stock 5% of 824,000 units