In: Accounting
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.
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 | ||||