Question

Croy Inc. has the following projected sales for the next five months: Month Sales in Units April 3,430 May 3,900 June 4,530 July 4,115 August 4,000 Croy’s finished goods inventory policy is to have 60 percent of the next month’s sales on hand at the end of each month. Direct material costs $2.80 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 3,712 pounds. Required: 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-

1.

Budgeted Production
	April	May	June
Budgeted sales	3,430	3,900	4,530
Add: Desired ending inventory	3,900*60% = 2,340	4,530*60% = 2,718	4,115*60% = 2,469
Total units needed	5,770	6,618	6,999
Less: Budgeted beginning inventory	3,430*60% = 2,058	3,900*60% = 2,340	4,530*60% = 2,718
Units to be produced	3,712	4,278	4,281

2.

Budgeted cost of material to be purchase
	April	May	June
units to be produced	3,712	4,278	4,281
Raw material required per unit	2	2	2
Total raw material required	7,424	8,556	8,562
Add: Ending raw material inventory	8,556*50% = 4,331	8,562*50% = 4,275	(((4,115+(4,000*60%)-2,469)*2)*50%) = 4,046
Raw material needed	11,755	12,831	12,608
Less: Beginning raw material inventory	3,712	8,556*50% = 4,278	8,562*50% = 4,281
Raw material to be purchase	8,043	8,553	8,327
Material price per pound	$ 2.80	$ 2.80	$ 2.80
Total raw material cost	$   22,520	$ 23,948	$ 23,316

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