Question

In: Accounting

Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

 

Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales. Sales for the year are expected to total 1,700,000 units. Quarterly sales are 19%, 27%, 23%, and 31%, respectively. The sales price is expected to be $42 per unit for the first three quarters and $44 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 15% higher than the budgeted sales for the first quarter of 2017.

Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume.

Direct materials. Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are 502,000 pounds.

Prepare the sales, production, and direct materials budgets by quarters for 2017.

Solutions

Expert Solution

sales, production, and direct materials budgets by quarters for 2017 are as prepared below:

Pargo Company
Sales Budget
Quarter
1 2 3 4 Year
Expected Unit sales 323000 459000 391000 527000 1,700,000
Unit selling price 42 42 42 44
Total sales 13,566,000 19,278,000 16,422,000 23,188,000 72,454,000
Pargo Company
Production Budget
Quarter
1 2 3 4 Year
Total sales 323,000 459,000 391,000 527,000 1,700,000
Desired Ending Finished Goods
114750 97750 131750 92862.5 92862.5
Total Required volume
437,750 556,750 522,750 619,863 1,792,863
Beginning finished goods 80750 114750 97750 131750 80750
Total production 357,000 442,000 425,000 488,113 1,712,113
Pargo Company
Direct material Budget
Quarter
1 2 3 4 Year
Budgeted production 357,000 442,000 425,000 488,113 1,712,113
Raw material required for 1 unit 2 2 2 2 2
Total Raw material Required 714,000 884,000 850,000 976,225 3,424,225
Add: Ending Raw material 88,400 85,000 97,623 50,200 50,200
Less: Opening raw material 71,400 88,400 85,000 97,623 71,400
Total raw material purchase 731,000 880,600 862,623 928,803 3,403,025
Cost of 1 pound 10 10 10 10 10
Cost of Material purchased 7,310,000 8,806,000 8,626,225 9,288,025 34,030,250

Working:

Pargo Company
Sales Budget
Quarter
1 2 3 4 Year
Expected Unit sales 1700000*19% 1700000*27% 1700000*23% 1700000*31%
Unit selling price 42 42 42 44
Total sales
Year 2018
Quarter 1
(323,000+ (323,000*.15) 48450 371450
44
16343800

Related Solutions

Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.
Do It! Review 21-2 Your answer is partially correct. Try again. Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 22%, 26%, 27%, and 25%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $47 per unit beginning in the fourth quarter. Sales in...
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production,...
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 18%, 23%, 23%, and 36%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $43 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 10% higher...
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production,...
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,900,000 units. Quarterly sales are 22%, 26%, 27%, and 25%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $44 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 15% higher...
Pargo Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production,...
Pargo Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 2,000,000 units. Quarterly sales are 18%, 26%, 23%, and 33%, respectively. The sales price is expected to be $38 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 15% higher...
1A . Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its...
1A . Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales:Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%,25%,and 30% respectively.The sales price is expected to be $40 per unit for the first three quartersand $45 per unit beginning in the fourth quarter.Sales in the first quarter of 2018 are expected to be 20% higher than the budgeted sales...
RiverbedCompany is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and...
RiverbedCompany is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,400,000 units. Quarterly sales are 18%, 26%, 24%, and 32%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $46 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 10% higher than...
Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales,...
Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total  1,100,000 units. Quarterly sales are  22%,  24%,  25%, and  29%, respectively. The sales price is expected to be $ 41 per unit for the first three quarters and $ 47 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be  15% higher than the budgeted...
Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales,...
Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales. Sales for the year are expected to total 1,800,000 units. Quarterly sales are 20%, 24%, 27%, and 29%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $46 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 12%...
Oak Creek Company is preparing its master budget for 2020. Relevant data pertaining to its sales,...
Oak Creek Company is preparing its master budget for 2020. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales: Sales for the year are expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 30%, respectively. The sales price is expected to be $40 per unit for the first three quarters and $46 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 10%...
Leaf Industries is preparing its master budget for 2013. Relevant data pertaining to its sales budget...
Leaf Industries is preparing its master budget for 2013. Relevant data pertaining to its sales budget are as follows: Sales for the year are expected to total 8,000,000 units. Quarterly sales are 25%, 30%, 15%, and 30%, respectively. The sales price is expected to be $2.00 per unit for the first quarter and then be increased to $2.20 per unit in the second quarter. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total for Yr Unit Sales 8,000,000 Unit Selling...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT