Question

In: Accounting

Ruiz Co. provides the following sales forecast for the next four months:     April May June...

Ruiz Co. provides the following sales forecast for the next four months:

   

April May June July
Sales (units) 690 770 720 810


The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on April 1 is 207 units. Assume July's budgeted production is 720 units. In addition, each finished unit requires five pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 1,071 pounds. Assume direct materials cost $3 per pound.

Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Solutions

Expert Solution

Direct Materials Budget
For April, May, and June
April May June
Budgeted production (units) 714 755 747
Materials requirements per unit 5 5 5
Materials needed for production 3570 3775 3735
Budgeted ending inventory (lbs.) 1133 1121 1080
Total materials requirements 4703 4896 4815
Beginning inventory (lbs.) (1071) (1133) (1121)
Materials to be purchased 3632 3763 3694
Cost per pound 3 3 3
Total cost 10896 11289 11082
Workings:
Production Budget
April May June
Next month's budgeted sales (units) 770 720 810
Ratio of inventory to future sales 30% 30% 30%
Budgeted ending inventory (units) 231 216 243
Budgeted unit sales for month 690 770 720
Required units of available production 921 986 963
Budgeted beginning inventory (units) (207) (231) (216)
Units to be produced 714 755 747
Note: Anwers might vary +1 due to rounding off

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