Question

Q2 Budgeting material purchases budget. The Ceremicon Company produces teapots from stoneware clay. The company has prepared a sales budget of 150,000 units of teapots for a 3-month period. It has an inventory of 34,000 units of teapots on hand at December 31 and has estimated an inventory of 38,000 units of teapots at the end of the succeeding quarter. One unit of teapot needs 2 pounds of stoneware clay. The company has an inventory of 82,000 pounds of stoneware clay at December 31 and has a target ending inventory of 95,000 pounds of stoneware clay at the end of the succeeding quarter. How many pounds of direct materials (stoneware clay) should Ceremicon purchase during the 3 months ending March 31?

Answer 1

Production and Direct Material purchase Budget
		Quarter 1
Budgeted Sales unit	a	150,000
Add: Closing stock of Teapot	b	38,000
Less: Opening stock of Teapot	c	(34,000)
Budgeted Production units	d=a+b-c	154,000
Direct material consumption(pounds)	e=d*2 pound	308,000
Add:Closing stock of Stoneware clay	f	95,000
Less:Opening stock of Stoneware clay	g	(82,000)
Budgeted Purchase unit(Pounds)	h=e+f-g	321,000
Ceremicon should purchase 3,21,000 pounds of Stoneware clay for 3 month ending 31st March.

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