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 5,000; second quarter 6,000; third quarter 7,000 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: 7,200 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. 3 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.

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

Answer 1

HARDIN COMPANY
Direct Materials Budget
For the six months ending June 30, 2017
	Quarter
	1	2	Six Months
Units to pe Produced	5250	6250	11500
Direct materials per unit	3	3	3
Total pounds required for production	15750	18750	34500
Plus: Desired ending Inventory	7500	8640*	8640
Total Materials required	23250	27390	43140
Less: Beginning material inventory	6300	7500	6300
Direct material purchases	16950	19890	36840
Cost per pound	$                  4.00	$               4.00	$                 4.00
Total cost of direct material Purchases	$       67,800.00	$    79,560.00	$    147,360.00

*7200 x 3 x 40%

Working

HARDIN COMPANY
Production Budget
For the six months ending June 30, 2017
	Quarter
	1	2	Six Months
Units to be sold	5000	6000	11000
Desired ending finished goods inventory	1500	1750	1750
Total units needed	6500	7750	12750
Less: Beginning inventory available	1250	1500	1250
Units to pe Produced	5250	6250	11500