Information for Question: The ExpressEspresso Company roasts and sells high quality certified sustainable coffee beans. The...

Information for Question: The ExpressEspresso Company roasts and sells high quality certified sustainable coffee beans. The final one pound bags of roasted whole coffee beans has two direct materials – coffee beans and packaging. ExpressEspresso is preparing budgets for the 4th quarter ending December 31, 2019. For each requirement below prepare budgets by month for October, November, and December, and a total budget for the quarter.

The previous year’s sales for the corresponding period were:

October 50,000 bags

November 55,000 bags

December 90,000 bags

January 75,000 bags

February 60,000 bags

The company expects the above volume of coffee sales to increase by 8% for the period October 2019 – February 2020. The budgeted selling price for 2019 is $19.50 per bag. The company expects 35% of its sales to be cash (COD) sales. The remaining 65% of sales will be made on credit.

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Question: The company desires to have finished goods inventory on hand at the end of each month equal to 10 percent of the following month's budgeted unit sales. On September 30, 2019, ExpressEspresso expects to have 5,350 bags of roasted coffee on hand.

Prepare a Production budget

Solutions

Expert Solution

Answer:-

Month	2018-19(units)	2019-20(units)
OCTOBER	50,000	54,000
NOVEMBER	55,000	59,400
DECEMBER	90,000	97,200
JANUARY	75,000	81,000
FEBRUARY	60,000	64,800

# 8% increase.

Ascertaining stock on hand at the end of October,november and December.

Closing stock each month = 10% of subsequent month sales.

Month	sales	Closing stock
OCTOBER	54,000	5,940 ( 10% of 59,400)
NOVEMBER	59,400	9,720 (10% of 97,200)
DECEMBER	97,200	8,100 (10% of 81,000)

Production budget for the quarter ending 31 December 2019 monthly wise i.e October,November, December.

Particulars	October	November	December
Forecasted unit sales	54,000	59,400	97,200
+ Planned ending inventory	5940	9720	8100
= Total production required	59,940	69,120	105,300

- Beginning inventory	(5350)*	(5940)	(9720)
= Units to be manufactured	54,590	63,180	95,580

# Closing stock of a month is equal to opening stock of succeeding month.

* Given in the question itself.

ekkarill92 answered 2 hours ago

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