The MendezCompany has prepared a sales budget of 42,000 finished units for a? 3-month period. The...

The MendezCompany has prepared a sales budget of 42,000 finished units for a? 3-month period. The company has an inventory of 14,000 units of finished goods on hand at December 31 and has a target finished goods inventory of 18,000 units at the end of the succeeding quarter. It takes 4 gallons of direct materials to make one unit of finished product. The company has an inventory of 60,000 gallons of direct materials at December 31 and has a target ending inventory of 51,000 gallons at the end of the succeeding quarter.

a. How many gallons of direct materials should Mendez Company purchase during the 3 months ending March? 31? Show your calculations for each section.

?Units of Finished goods to be produced	?
(Multiplied by) Amount of raw material per unit	?
Gallons to be used in production	?
(Add) Target ending Inventory	?
Total Required gallons	?
(Less) Begininning Inventory	?
Purchase to be made in gallons	?

B) What questions might the CEO ask of the operating manager when reviewing the? budget? ?(Select three that? apply.)

A.Is the increased finished goods ending inventory because of anticipated production or quality? problems?

B. Can the target finished goods ending inventory be reduced so as to reduce? inventory-related costs?

C.Has the target finished goods ending inventory taken into account the level of employees required to produce the inventory needed to still be of good quality.

D.Is the sales budget for finished units for the? 3-month period an amount that can be increased through increased? production?

E. Can fewer than 44 gallons of direct materials be used to produce each unit of finished product by reducing waste and improving quality and? efficiency?

F. Can target ending direct materials inventory be increased to allow for a larger supply in the following? year?

Solutions

Expert Solution

(A)

(B) Questions the CEO might ask of the operating manager when reviewing the? budget would be:

a. Is the increased finished goods ending inventory because of anticipated production or quality? problems?

b. Has the target finished goods ending inventory taken into account the level of employees required to produce the inventory needed to still be of good quality.

c. Can fewer than 44 gallons of direct materials be used to produce each unit of finished product by reducing waste and improving quality and? efficiency?

ekkarill92 answered 11 months ago

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