Question

Ruiz Co. provides the following sales forecast for the next four months:

	April		May		June		July
Sales (units)	570		650		600		690

The company wants to end each month with ending finished goods inventory equal to 30% of next month's forecasted sales. Finished goods inventory on April 1 is 171 units. Assume July's budgeted production is 600 units. In addition, each finished unit requires four pounds (lbs.) of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 713 pounds. Assume direct materials cost $4 per pound.

1. Prepare a production budget for the months of April, May, and June.

2. Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

	RUIZ CO. Production Budget For April, May, and June April May June Next month's budgeted sales (units) 650 600 690 Ratio of inventory to future sales 30% Required units of available production Units to be produced

	RUIZ CO. Direct Materials Budget For April, May, and June April May June Materials needed for production (lbs.) Total materials requirements (lbs.) Materials to be purchased (lbs.) Total budgeted direct materials cost

Answer 1

	Ruiz Company
	Production Budget
	For April, May and June
		April	May	June
	Next Month budgeted sales (units)	650	600	690
	Ratio of Inventory to future sales	30%	30%	30%
	Budgeted ending inventory (units)	195	180	207
Add:	Budgeted unit sales for month	570	650	600
	Required units of available production	765	830	807
Less:	Budgeted beginning inventory (units)	171	195	180
	Units to be produced	594	635	627
	Ruiz Company
	Direct Material Budget
	For April, May and June
		April	May	June
	Budgeted production (units)	594	635	627
	Material requirements per unit	4	4	4
	Material needed for production (lbs)	2,376	2,540	2,508
Add:	Budgeted ending inventory (lbs)	762	752	720
	Total materials requirements	3,138	3,292	3,228
Less:	Budgeted beginning inventory (lbs)	713	762	752
	Materials to be purchased	2,425	2,530	2,476
	Direct Material cost per pound	$         4	$            4	$         4
	Total budgeted direct material cost	$ 9,700	$ 10,122	$ 9,902
	Notes:
	Finished Goods Inventory	=	30%
	Finished Goods Inventory, on April 1	=	171 units
	July Budgeted production	=	600 units
	Required Raw Material	=	4 pounds
	Raw material inventory	=	30%
	Beginning Raw material	=	713
	July Production (600 X 4)	=	2400
	Ending Inventory of Current year is the openning inventory of next year.