Question

On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.

Sales units:		First quarter 5,400; second quarter 6,100; third quarter 7,900.
Ending raw materials inventory:		40% of the next quarter’s production requirements.
Ending finished goods inventory:		25% of the next quarter’s expected sales units.
Third-quarter production:		7,430 units.

The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $6 per pound.

Prepare a production budget by quarters for the 6-month period ended June 30, 2020.

HARDIN COMPANY Production Budget                                                                       For the Six Months Ending June 30, 2020June 30, 2020For the Quarter Ending June 30, 2020
	Quarter
		1		2		Six Months
Required Production UnitsDirect Materials Per UnitDesired Ending Direct MaterialsTotal Materials RequiredDirect Materials PurchasesTotal Required UnitsExpected Unit SalesDesired Ending Finished Goods UnitBeginning Finished Goods UnitBeginning Direct Materials
AddLess:                                                                       Direct Materials PurchasesTotal Required UnitsExpected Unit SalesDesired Ending Direct MaterialsTotal Materials RequiredDirect Materials Per UnitRequired Production UnitsBeginning Finished Goods UnitBeginning Direct MaterialsDesired Ending Finished Goods Unit
Total Required UnitsExpected Unit SalesBeginning Direct MaterialsBeginning Finished Goods UnitDirect Materials Per UnitDirect Materials PurchasesRequired Production UnitsTotal Materials RequiredDesired Ending Finished Goods UnitDesired Ending Direct Materials
AddLess:                                                                       Desired Ending Finished Goods UnitBeginning Finished Goods UnitTotal Required UnitsDirect Materials Per UnitRequired Production UnitsBeginning Direct MaterialsExpected Unit SalesDesired Ending Direct MaterialsDirect Materials PurchasesTotal Materials Required
Desired Ending Direct MaterialsDirect Materials PurchasesTotal Required UnitsBeginning Direct MaterialsRequired Production UnitsDirect Materials Per UnitDesired Ending Finished Goods UnitTotal Materials RequiredBeginning Finished Goods UnitExpected Unit Sales

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Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2020.

HARDIN COMPANY Direct Materials Budget                                                                       For the Six Months Ending June 30, 2020June 30, 2020For the Quarter Ending June 30, 2020
		Quarter
		1		2		Six Months
Cost Per PoundUnits to be ProducedDirect Materials PurchasesTotal Direct Labor CostTotal Materials RequiredDesired Ending Direct Materials (Pounds)Direct Labor Time Per UnitTotal Pounds Needed for ProductionTotal Required Direct Labor HoursTotal Cost of Direct Materials PurchasesDirect Materials Per UnitBeginning Direct Materials (Pounds)Direct Labor Cost Per Hour
Total Materials RequiredTotal Required Direct Labor HoursDirect Labor Cost Per HourDirect Labor Time Per UnitCost Per PoundDesired Ending Direct Materials (Pounds)Direct Materials PurchasesTotal Direct Labor CostTotal Pounds Needed for ProductionUnits to be ProducedBeginning Direct Materials (Pounds)Total Cost of Direct Materials PurchasesDirect Materials Per Unit
Direct Materials Per UnitTotal Materials RequiredDesired Ending Direct Materials (Pounds)Total Pounds Needed for ProductionCost Per PoundBeginning Direct Materials (Pounds)Direct Labor Cost Per HourTotal Required Direct Labor HoursTotal Cost of Direct Materials PurchasesDirect Labor Time Per UnitTotal Direct Labor CostDirect Materials PurchasesUnits to be Produced
AddLess:                                                                       Units to be ProducedDirect Labor Cost Per HourDirect Materials PurchasesTotal Required Direct Labor HoursTotal Materials RequiredTotal Cost of Direct Materials PurchasesDirect Materials Per UnitDesired Ending Direct Materials (Pounds)Cost Per PoundBeginning Direct Materials (Pounds)Total Pounds Needed for ProductionTotal Direct Labor CostDirect Labor Time Per Unit

Answer 1

	Production Budget
	For the Six Months Ending June 30, 2020
	1	2	Six months
Expected Unit Sales	5400	6100
Add: Desired ending Finished goods units	1525	1975
Total Required Units	6925	8075
Less: Beginning Finished goods units	1350	1525
Required Production Units	5575	6550	12125
	Direct materials budget
	For the Six Months Ending June 30, 2020
	1	2	Six months
Units to be produced	5575	6550
Direct materials per unit	5	5
Total pounds needed for production	27875	32750
Add: Desired ending Direct materials	13100	14860
Total materials required	40975	47610
Less: Budgeted Beginning materials	11150	13100
Direct materials purchases	29825	34510
Cost per pound	6	6
Total cost of direct materials purchases	178950	207060	386010

Workings:

Desired ending Finished goods units:

Q1 = 6100*25%=1525

Q2 = 7900*25%=1975

Beginning Finished goods units

Q1 = 5400*25%=1350

Desired ending Direct materials:

Q1 = 32750*40%=13100

Q2=7430*5*40%=14860

Budgeted Beginning materials:

Q1 = 27875*40%=11150