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In: Accounting

ABC Inc. has compiled the following data in order to put together their first quarter operating...

ABC Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:

January

February

March

April

Sales (units)

            50,000

            55,000

            40,000

            30,000

Additional information:

ABC sells each unit for $200.

Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met in December.

Company policy is to have 25% of next month’s production needs in ending raw materials inventory. The production needs for April is 120,000. This policy was met in December.

It takes four pounds of material to produce each unit and the cost is $5.00/pound.

Required:

1. Prepare a sales budget for the January, February and March and for the first quarter in total.

2. Prepare a production budget for January, February and March and for the first quarter in total.

3. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.

Solutions

Expert Solution

Part 1
Sales Budget
January February March Total
Sales (units) 50000 55000 40000 145000
Price per unit $200.00 $200.00 $200.00 $600.00
Sales (Amount) $1,00,00,000.00 $1,10,00,000.00 $80,00,000.00 $2,90,00,000.00
Part 2
Production Budget
January February March Total
Sales (units) 50000 55000 40000 145000
ADD : Closing Stock 16500 12000 9000 37500
LESS : Opening Stock 15000 16500 12000 43500
Production Budget 51500 50500 37000 139000
Part 3
Direct Material Purchase Budget
January February March Total
Production Budget 51500 50500 37000 139000
Material/unit 4 4 4 4
Raw material required 206000 202000 148000 556000
Add : Closing Stock 50500 37000 30000 117500
LESS : Opening Stock 51500 50500 37000 139000
RM Required 205000 188500 141000 534500
Cost/unit $5.00 $5.00 $5.00 $5.00
RM Purchased Budget $10,25,000.00 $9,42,500.00 $7,05,000.00 $26,72,500.00

ekkarill92 answered 2 years ago
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