Question

In: Accounting

4. Italiano Manufacturing Company produces one type of pasta. For the coming quarter, it estimates that...

4. Italiano Manufacturing Company produces one type of pasta. For the coming quarter, it estimates that it will sell 25,000 kg of finished product. It currently has 1,000 kg in stock and expects to increase this to 2,000 kg at the end of the quarter.

The main ingredients to make 1 kilogram of pasta are 900 grams of durum wheat and two eggs. Prices for these items are budgeted at $2,100 per tonne of wheat and $3 per dozen eggs.

The company is holding 2.5 tonnes of wheat but wants to reduce this to 2.2 tonnes by the end of the quarter. It holds no stock of eggs, buying them in as needed.

a) Prepare the production budget for the quarter.

b) Prepare the direct materials budget for the quarter.

Solutions

Expert Solution

(A)

PRODUCTION BUDGET:

Particulars Quarter (in kg)

Forcasted unit sales

(+) Planned ending inventory of finished goods (units)

25000

2000

Total units

(-) Beginning inventory of finished goods (units)

27000

1000
Units required to be produced 26000

(B)

DIRECT MATERIAL BUDGET:

Particulars Quarter
Durum wheat (in tonne) eggs

Budgeted production units

(x) required direct material per unit

26000

0.0009

26000

2

Total direct material (units)

(+) Planned ending direct material (units)

23.4

2.2

52000

0

Total direct material (units)

(-) beginning direct material (units)

25.6

2.5

52000

0

Total direct material units to be purchased

(x) purchase price per unit of direct material

23.1

$2100

52000

$3
Total direct material purchase required $48510 $156000

CONVERSION OF GRAM INTO TONNE

900 gram into tonne = 900/1000000 = 0.0009 tonne.

ekkarill92 answered 4 months ago
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