Question

White Corporation’s budget calls for the following sales for next year.

Quarter 1 90,000 units Quarter 3 68,000 units
Quarter 2 76,000 units Quarter 4 96,000 units

Each unit of product requires 3 pounds of direct materials. The companypolicy is to begin each quarter with an inventory of product equla to 5% of that quater's estimaged sales requirements and an inventory of direct materials equal to 20% of that quarter’s estimated direct materials requirements for production.

Required:
Determine the production and materials purchases budgets for the second quarter.

Answer 1

Production Budget Quarter 2 Quarter 3

Sales 76000 68000

Add:desired closing inventory 3400 4800

Less: opening inventory 3800 3400

Production budget 75600 69400

Material Budget Quarter 2

Consumption 226800 (3 units x 75600)

Add:desired closing inventory 41640 (20% of the subsequent quarter)

(69400 x 3 x 0.20)

Less:opening inventory 45360 (20% of the current quarter)

Raw material to be purchased 223080