Question

In: Accounting

Part A Epic Foods produces specialty soup sold in mason jars. The projected sales in dollars...

Part A

Epic Foods produces specialty soup sold in mason jars. The projected sales in dollars and jars for each quarter of the upcoming year are as follows:

Total sales revenue

Number of jars sold

1st quarter (2021)

$182,000

150,000

2nd quarter(2021)

$210,000

180,500

3rd quarter(2021)

$251,000

213,500

4th quarter(2021)

$195,000

164,500

Epic anticipates selling 223,000 jars with total sales revenue of $265,000 in the first quarter of the year (2022) following the year given in the table above. Epic has a policy that the ending inventory of jars must be 30% of the following quarter’s sales. Prepare a production budget for the year that shows the number of jars to be produced each quarter and the year in total.

PART B

Gable industries manufactures a popular interactive stuffed animal for children that requires two computer chips inside each toy. Gable pays $3 for each computer chip. To help guard against stockouts of the computer chip Gable has a policy that states that the ending inventory of computer chips should be at least 20% of the following month’s production needs. The production schedule for the first four months of the year is as follows:

Month

Stuffed animals to be produced

January

5,700

February

4,600

March

4,300

April

4,900

Required: Prepare a direct materials budget for the first quarter that shows both the number of computer chips needed and the dollar amount of the purchases in the budget

Solutions

Expert Solution

PRODUCTION BUDGET  

PARTICULARS Q1 Q2 Q3 Q4

SALES UNIT 1,50,000 1,80,500 2,13,500 1,64,500

DESIRED CLOSING STOCK 54,150 64,050 49,350 66,900

(SEE WORKING NOTE)

TOTAL REQUIRED UNITS 204150 244550 262850 231400

LESS: OPENING

INVENTORY ( 0 )    ( 54150) ( 64050 ) (49350)

TOTAL PRODUCTION UNITS 204150 190400 198800 182050

TOTAL UNITS IN YEAR = 775400 UNITS

WORKING NOTE

CALCULATION OF DESIRED CLOSING STOCK

QTR 1 = 30 % OF QTR 2 SALES = 30% X 180500

=54150 UNITS

QTR 2 = 30 % OF QTR 3 SALES = 30% X 213500

=64050 UNITS

QTR 3 = 30 % OF QTR 4 SALES = 30% X 164500

=49350

QTR 4 = 30% OF NEXT QTR SALES =30% X 223000

=66900

PART 2 PURCHASE BUDGET

PARTICULARS JAN FEB MAR APRIL

UNITS PRODUCED 5700 4600 4300 4900

ADD: CLOSING STOCK 920 860 980 0

(SEE WORKING NOTE )

LESS: OPENING STOCK 0 920 860 980

PURCHASE IN UNITS 6620 4540 4420 3920

NO. OF CHIPS REQUIRED

PER UNIT OF FINISHED 2 2 2 2

TOTAL CHIPS REQUIRED 13240 9080 8840 7840

RATE PER CHIP $3 $3 $3 $3

TOTAL AMOUNT $39720 $27240 $26520 $23520

WORKING NOTE

CALCULATION OF DESIRED CLOSING STOCK

JAN = 20 % OF FEB SALES = 20% X 4600

=920 UNITS

FEB = 20% OF MAR SALES = 20% X 4300

=860 UNITS

MAR = 20 % OF FEB SALES = 20% X 4900

=980 UNITS

ekkarill92 answered 1 year ago
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