Question

In: Accounting

Vaughn Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for...

Vaughn Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Vanessa Aaron, the company’s sales manager, prepared the following sales forecast for 2018. The forecasted sales prices include a 5% increase in the acoustic guitar price and a 10% increase in the electric guitar price, to cover anticipated increases in raw materials prices.

Sales Price 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Acoustic guitar sales $1,290 200 260 300 310
Electric guitar sales $2,380 390 340 300 370
Each acoustic guitar requires a maple neck blank, which Vaughn purchases for $45. On December 31, 2017, Vaughn had 390 neck blanks in inventory. Spoilage during the production process results in a standard quantity of 1.5 necks per acoustic guitar. Because of recent delivery problems, Vaughn wants to maintain an ending inventory equal to 50% of the following quarter’s production needs. Since the supplier has assured Vaughn that the delivery issues will be resolved by the end of December, Vaughn wants only 390 neck blanks in inventory on December 31, 2018. Prepare the purchases budget for neck blanks for 2018. (Enter "per guitar" value to 1 decimal place, e.g. 3.1. Round all other answers to 0 decimal places, e.g. 153.)
Purchases Budget

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Annual

                                                                      Budgeted productionBudgeted ending inventoryStandard necks per guitarProduction needsBudgeted purchases (necks)Standard price per neckBeginning inventoryTotal DM required (necks)Budgeted purchases cost

                                                                      Standard necks per guitarBudgeted purchases (necks)Beginning inventoryProduction needsStandard price per neckBudgeted ending inventoryBudgeted purchases costTotal DM required (necks)Budgeted production
                                                                      Budgeted productionBeginning inventoryTotal DM required (necks)Standard price per neckBudgeted ending inventoryBudgeted purchases costBudgeted purchases (necks)Standard necks per guitarProduction needs
                                                                      Budgeted purchases costStandard price per neckTotal DM required (necks)Beginning inventoryProduction needsBudgeted purchases (necks)Standard necks per guitarBudgeted productionBudgeted ending inventory
                                                                      Standard necks per guitarBudgeted purchases (necks)Beginning inventoryProduction needsBudgeted purchases costBudgeted productionBudgeted ending inventoryStandard price per neckTotal DM required (necks)
                                                                      Standard price per neckBudgeted ending inventoryTotal DM required (necks)Standard necks per guitarBudgeted purchases costBudgeted productionProduction needsBeginning inventoryBudgeted purchases (necks)
                                                                      Total DM required (necks)Standard necks per guitarBudgeted purchases (necks)Budgeted productionBudgeted ending inventoryBudgeted purchases costBeginning inventoryProduction needsStandard price per neck
                                                                      Budgeted ending inventoryBudgeted purchases (necks)Production needsStandard price per neckStandard necks per guitarTotal DM required (necks)Beginning inventoryBudgeted purchases costBudgeted production $ $ $ $ $
                                                                      Beginning inventoryTotal DM required (necks)Production needsBudgeted productionStandard price per neckBudgeted ending inventoryStandard necks per guitarBudgeted purchases (necks)Budgeted purchases cost $

Solutions

Expert Solution

For 1st Quarter

Opening balance of neck blanks = 390 units

Usage of bottle neck in 1st quarter = 1.5*200 = 300 units

Desired closing stock = 50% of (260*1.5) = 195 units

purchase units = usage + desired units - opening stock

= 300+195-390= 105 units

For 2nd Quarter

Opening balance of neck blanks = 195 units

Usage of bottle neck in 2nd quarter = 1.5*260 = 390 units

Desired closing stock = 50% of (300*1.5) = 225 units

purchase units = usage + desired units - opening stock

= 390+225-195= 420 units

For 3rd Quarter

Opening balance of neck blanks = 225 units

Usage of bottle neck in 3rd quarter = 1.5*300 = 450 units

Desired closing stock = 50% of (310*1.5) = 233 units

purchase units = usage + desired units - opening stock

= 450+233-2250= 458 units

For 4th Quarter

Opening balance of neck blanks = 233 units

Usage of bottle neck in 3rd quarter = 1.5*310 = 465 units

Desired closing stock = 390 units

purchase units = usage + desired units - opening stock

= 465+390-233= 622 units


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