Question

Feathered FriendsFeathered Friends makes backyard birdfeeders. The company sells the birdfeeders to home improvement stores for $12 per birdfeeder. Each birdfeeder requires 3.0 board feet of​ wood, which the company obtains at a cost of $2 per board foot. The company would like to maintain an ending stock of wood equal to 10% of the next​ month's production requirements. The company would also like to maintain an ending stock of finished birdfeeders equal to 25% of the next​ month's sales. Sales data for the company is as​ follows:

	Units
October actual sales (prior year). . . . . . . .	96,000
November actual sales (prior year). . . . . .	89,000
December actual sales (prior year). . . . . .	80,000
January projected sales. . . . . . . . . . . . .	76,000
February projected sales. . . . . . . . . . . . . .	86,000
March projected sales. . . . . . . . . . . . . . . . .	97,000
April projected sales. . . . . . . . . . . . . . . . . .	110,000

In any given​ month, 20% of the total sales are cash​ sales, while the remainder are credit sales.

The​ company's collection history indicates that 60 % of credit sales is collected in the month after the​ sale, 30% is collected two months after the​ sale, 5% is collected three months after the​ sale, and the remaining 5% is never collected.

Assume that the total cost of direct materials purchases in December was $520,000. The company pays 60% of its direct materials purchases in the month of​ purchase, and pays the remaining 40% in the month after purchase.

Prepare the direct materials purchases budget for the first three months of the​ year, as well as a summary budget for the quarter. Assume the company needs 105,000

board feet of wood for production in April. ​(Round your answers to the nearest whole​ dollar.)

Feathered Friends
Direct Materials Budget
For the Quarter Ended March 31

	January	February	March	Quarter
Units to be produced
Multiply by: Quantity (board feet) of DM needed per unit
Quantity (board feet) needed for production
Plus: Desired ending inventory of DM
Total quantity (board feet) needed
Less: Beginning inventory of DM
Quantity (board feet) to purchase
Multiply by: Cost per board foot
Total cost of DM purchases

Answer 1

	FINISHED GOODS PRODUCTION
		DECEMBER	JANUARY	FEBRUARY	MARCH	APRIL
	SALES	80000	76000	86000	97000	110000
	ADD: CLOSING
	25% OF NEXT MONTH SALES	19000	21500	24250	27500
	LESS: OPENING	-20000	-19000	-21500	-24250
	PRODUCTION	79000	78500	88750	100250
	QUANTITY OF BOARD FEET OF DM NEEDED PER UNIT	3	3	3	3
	QUANTITY OF BOARD FEET NEEDED FOR PRODUCTION	237000	235500	266250	300750
	PLUS: DESIRED ENDING INVENTORY	23550	26625	30075	10500
	TOTAL QUANTITY NEEDED	260550	262125	296325	311250
	LESS: OPENING INVENTORY		23550	26625	30075
	Feathered Friends
	Direct Materials Budget
	For the Quarter Ended March 31
		January	February	March	Quarter
	Units to be produced	78500	88750	100250	267500
	Multiply by: Quantity (board feet) of DM needed per unit	3	3	3	3
	Quantity (board feet) needed for production	235500	266250	300750	802500
	Plus: Desired ending inventory of DM	26625	30075	10500	67200
	Total quantity (board feet) needed	262125	296325	311250	869700
	Less: Beginning inventory of DM	23550	26625	30075	80250
	Quantity (board feet) to purchase	238575	269700	281175	789450
	Multiply by: Cost per board foot	2	2	2	2
	Total cost of DM purchases	477150	539400	562350	1578900