Question

In: Accounting

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data...

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017.

Sales units: First quarter 5,100; second quarter 6,300; third quarter 7,300
Ending raw materials inventory: 40% of the next quarter’s production requirements
Ending finished goods inventory: 25% of the next quarter’s expected sales units
Third-quarter production: 7,670 units.


The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.

Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017.

Solutions

Expert Solution

Direct materials budget
For the Six Months Ending June 30, 2017
1 2 Six months
Units to be produced 5400 6550
Direct materials per unit 5 5
Total pounds needed for production 27000 32750
Add: Desired ending Direct materials 13100 15340
Total materials required 40100 48090
Less: Budgeted Beginning materials 10800 13100
Direct materials purchases 29300 34990
Cost per pound 5 5
Total cost of direct materials purchases 146500 174950 321450
Workings:
Production Budget
For the Six Months Ending June 30, 2017
1 2 Six months
Expected Unit Sales 5100 6300
Addl Desired ending Finished goods units 1575 1825
Total Required Units 6675 8125
Less: Beginning Finished goods units 1275 1575
Required Production Units 5400 6550 11950
Desired ending Finished goods units:
Q1 = 6300*25%=1575
Q2 = 7300*25%=1825
Beginning Finished goods units
Q1 = 5100*25%=1275
Desired ending Direct materials:
Q1 = 32750*40%=13100
Q2=7670*5*40%=15340
Budgeted Beginning materials:
Q1 = 27000*40%=10800

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