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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

Sales Budget
January February March Quarter
Budgeted sales in units 50000 55000 40000 145000
Sales price $200 $200 $200 $200
Total sales $10,000,000 $11,000,000 $8,000,000 $29,000,000
Production Budget
January February March Quarter April
Budgeted sales in units 50000 55000 40000 145000 30000
Add Desired Finished Goods Inventory (30%*next month budgeted sales) 16500 12000 9000 9000
Total Needs 66500 67000 49000 154000
Less Beginning Inventory 15000 16500 12000 15000
(50000*30%)
Required Production 51500 50500 37000 139000
Purchase Budget January February March Quarter April
Required production (units) 51500 50500 37000 139000
Raw materials required to produce one unit 4 4 4 4
Production needs (pounds) P 206000 202000 148000 556000 120000
Add desired ending inventory of raw materials (pounds) (P*25%) 50500 37000 30000 30000
Total needs (pounds) 256500 239000 178000 586000
Less beginning inventory of raw materials (pounds) 59750 50500 37000 59750
Raw materials to be purchased 196750 188500 141000 526250
Cost of raw materials per pound $5 $5 $5 $5
Cost of raw materials to be purchased $983,750 $942,500 $705,000 $2,631,250
If any doubt please comment

ekkarill92 answered 2 years ago
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