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In: Accounting

Tempting Toys manufactures and distributes a number of products to retailers. One of these products, Playclay,...

Tempting Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires two pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter—July, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements:

  

a.

The finished goods inventory on hand at the end of each month must be equal to 8,000 units plus 33% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be as expected.

b.

The raw materials inventory on hand at the end of each month must be equal to one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 for material A135 is budgeted to be as expected.

c. The company maintains no work in process inventories.

  

A sales budget for Playclay for the last six months of the year follows.

  

Budgeted Sales
in Units
  July 37,000             
  August 47,000             
  September 67,000             
  October 32,000             
  November 17,000             
  December 7,000             

  

Required:
1.

Prepare a production budget for Playclay for the months July, August, September, and October.

Playclay
Production Budget
July August September October
Budgeted sales
Total needs
Required production
3.

Prepare a direct materials budget showing the quantity of material A135 to be purchased for July, August, and September and for the quarter in total.

Playclay
Direct Materials Budget
July August September Third Quarter
Production needs (lbs)
Total Material A135 needs
Material A135 purchases

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