Question

Shadee Corporation expects to sell 630 sun shades in May and 400 in June. Each shade sells for $162. Shadee’s beginning and ending finished goods inventories for May are 90 and 45 shades, respectively. Ending finished goods inventory for June will be 65 shades. Each shade requires a total of $60.00 in direct materials that includes 4 adjustable poles that cost $5.00 each. Shadee expects to have 130 in direct materials inventory on May 1, 90 poles in inventory on May 31, and 120 poles in inventory on June 30. Required: Prepare Shadee’s May and June purchases budget for the adjustable poles.

Answer 1

Shadee Corporation needs to purchase 2,300 poles in May and 1,710 poles in June to meet production and inventory requirements for adjustable poles.

Step-by-step explanation:

To prepare the May and June purchases budget for the adjustable poles for Shadee Corporation, we need to calculate the number of poles needed for production as well as adjustments for beginning and ending inventory levels.

May Purchases Budget for Adjustable Poles

We calculate the number of shades to be produced by adding the expected sales to the ending inventory and then subtracting the beginning inventory (630 shades to sell + 45 shades for ending inventory - 90 shades for beginning inventory = 585 shades to be produced in May). Each shade requires 4 poles, so we need 2,340 poles (585 shades x 4 poles). Considering the beginning inventory of poles (130 poles), the desired ending inventory (90 poles), and the poles required for production, Shadee's May purchase for adjustable poles would be 2,300 poles (2,340 poles needed - 130 poles beginning inventory + 90 poles ending inventory).

June Purchases Budget for Adjustable Poles

For June, the calculations follow a similar pattern: 400 shades to sell + 65 shades for ending inventory - 45 shades for beginning inventory = 420 shades to be produced in June. Multiplying the shades to be produced by the number of poles per shade gives us 1,680 poles (420 shades x 4 poles) needed. Considering the beginning inventory of 90 poles from May and wanting 120 poles in inventory at the end of June, Shadee's June purchase for adjustable poles would be 1,710 poles (1,680 poles needed - 90 poles beginning inventory + 120 poles ending inventory).

Answer 2

The purchases budget for adjustable poles for Shadee Corporation is calculated based on estimated sales and required inventory levels. For May, 2480 poles need to be purchased, and for June, 1630 poles need to be bought.

Step-by-step explanation:

To prepare Shadee’s May and June purchases budget for adjustable poles, we need to calculate the number of poles needed for production and adjust for inventory changes. The poles cost $5.00 each, and each sun shade requires 4 poles.

May Budget

Shades to be sold in May: 630
Beginning inventory of poles: 130 (Which means we have 130/4 = 32.5 shades worth of poles)
Ending inventory of poles: 90 Poles
Poles needed for May’s sales = 630 shades * 4 poles/shade = 2520 poles
Total poles required for May = 2520 poles + (90 - 130 poles for inventory adjustment) = 2520 poles - 40 poles = 2480 poles
June Budget

Shades to be sold in June: 400
Ending inventory of poles in May becomes the beginning inventory for June = 90 poles
Ending inventory of poles for June: 120 Poles
Poles needed for June’s sales = 400 shades * 4 poles/shade = 1600 poles
Total poles required for June = 1600 poles + (120 - 90 poles for inventory adjustment) = 1600 poles + 30 poles = 1630 poles
The budgets for May and June are calculated based on the estimated sales and desired inventory levels, using the provided unit cost and production requirements. Adjustments are made for beginning and ending inventories to ensure that the right amount of materials is available without excessive overstocking.