Arnold Co. budgeted to sell 11,500 units of Gizmo in September. Production of one unit of...

Arnold Co. budgeted to sell 11,500 units of Gizmo in September. Production of one unit of Gizmo requires two (2) pounds of aluminum and four (4) pounds of steel powder. The beginning inventory and the desired ending inventory are as follows:

	Beginning Inventory		Desired Ending Inventory
Gizmo	2,400	units	3,300	units
Aluminum	1,500	pounds	1,700	pounds
Steel powder	1,300	pounds	1,000	pounds

a) Production budget: How many units of Gizmo should Arnold plan to make in September?

b) Direct materials production budget, Aluminum and Steel Powder: Ignore your answer in (a). If Arnold plans to manufacture 15,000 units of Gizmo in September, how much Aluminum and how much Steel powder in pounds only does Arnold need for production in September?

c) Direct materials purchases budget, Aluminum: How many pounds of Aluminum does Arnold Co. need to purchase during September if Arnold plans to manufacture 15,000 units of Gizmo in September?

Solutions

Expert Solution

Answer : A Production Budget
Arnold Company
Production Budget September
Gizmo
Particulars	Units
Budgeted Sales (A)	11500
Desired Ending Inventory (B)	3300
Total Units Required C= (A+B)	14800
Beginning Inventory (D)	2400
Units To be Produced C-D	12400

Answer : b If Company plans to produce 12400 units of Gizmo
Direct Materials Purchase Budget

Arnold Company
Purchase Budget September
Aluminum
Particulars	Pounds
Required to Manufacture Gizmo (12400X2)	24800
Desired Ending Inventory (B)	1700
Total Units Required C= (A+B)	26500
Beginning Inventory (D)	1500
Units To be Purchased C-D	25000

Arnold Company
Purchase Budget September
Steel powder
Particulars	Pounds
Required to Manufacture Gizmon (12400X4)	49600
Desired Ending Inventory (B)	1000
Total Units Required C= (A+B)	50600
Beginning Inventory (D)	1300
Units To be Purchased C-D	49300

b) Direct Material Needed to produce 15000 units of Gizmo
Arnold Company
Direct Material Needed to produce 15000 units of Gizmo
Particulars	Pounds	Pounds
Required to Manufacture Gizmo	30000	60000

Answer : (C) If Company plans to produce 15000 units of Gizmo
Direct Materials Purchase Budget

Arnold Company
Purchase Budget September
Aluminum
Particulars	Pounds
Required to Manufacture Gizmo (15000X2)	30000
Desired Ending Inventory (B)	1700
Total Units Required C= (A+B)	31700
Beginning Inventory (D)	1500
Units To be Purchased C-D	30200


Arnold Company
Purchase Budget September
Steel powder
Particulars	Pounds
Required to Manufacture Gizmo (15000X4)	60000
Desired Ending Inventory (B)	1000
Total Units Required C= (A+B)	61000
Beginning Inventory (D)	1300
Units To be Purchased C-D	59700

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