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 6,800; 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.

Solutions

Expert Solution

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

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