Question

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 6,800; 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:		7,390 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. 4 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.

Answer 1

	Direct materials budget
	For the Six Months Ending June 30, 2017
	1	2	Six months
Units to be produced	5525	6925
Direct materials per unit	4	4
Total pounds needed for production	22100	27700
Add: Desired ending Direct materials	11080	11824
Total materials required	33180	39524
Less: Budgeted Beginning materials	8840	11080
Direct materials purchases	24340	28444
Cost per pound	5	5
Total cost of direct materials purchases	121700	142220	263920
Workings:
	Production Budget
	For the Six Months Ending June 30, 2017
	1	2	Six months
Expected Unit Sales	5100	6800
Addl Desired ending Finished goods units	1700	1825
Total Required Units	6800	8625
Less: Beginning Finished goods units	1275	1700
Required Production Units	5525	6925	12450
Desired ending Finished goods units:
Q1 = 6800*25%=1700
Q2 = 7300*25%=1825
Beginning Finished goods units
Q1 = 5100*25%=1275
Desired ending Direct materials:
Q1 = 27700*40%=11080
Q2=7390*4*40%=11824
Budgeted Beginning materials:
Q1 = 22100*40%=8840