Question

RyRy, Inc. manufactures dance apparel. Unit sales projections for the first five months of the upcoming year are as follows:

January 3500

February 3,800

March 3,300

April 4800

May 5,000

Beginning finished goods inventory consisted of 750 units. The desired inventory of units at the end of each month in the upcoming year should equal 25% of the following month’s budgeted unit sales.

Each unit requires 4 yards of fabric. The company wants to have 20% of the fabric required for the next month’s expected production on hand at the end of each month. This inventory requirement was met at the end of the previous year. The fabric costs $0.20 per yard.

What is the expected dollar amount of raw material purchases for the first quarter of the upcoming year?

Answer 1

PRODUCTION BUDGET
			Jan	Feb	Mar	QUARTER	April	May
Budgeted Sales Units			3,500	3,800	3,300	10,600	4,800	5,000
Add: Desired Ending Finished inventory			950	825	1,200	1,200	1,250
Total Needs			4,450	4,625	4,500	11,800	6,050
Less: Beginning Finished Inventory			750	950	825	750	1,200
Required Production in units			3,700	3,675	3,675	11,050	4,850
RAW MATERIAL PURCHASE BUDGET
			Jan	Feb	Mar	QUARTER	April
Budgeted Production units			3,700	3,675	3,675	11,050	4,850
Raw material Required per unit			4	4	4	4	4
Total Raw material requirement			14,800	14,700	14,700	44,200	19,400
Add: Desired Ending Inventory			2,940	2,940	3,880	12,000
Total needs			17,740	17,640	18,580	56,200
Less: Beginning Inventory			2,960	2,940	2,940	2,960
Purchase Units			14,780	14,700	15,640	53,240
Cost price per unit			0.20	0.20	0.20	0.20
Budgeted Purchase in $			2,956	2,940	3,128	10,648