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.
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.
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 | |
|
114750 | 97750 | 131750 | 92862.5 | 92862.5 | |
|
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 |