Question

1. Production and DM budgets: Stolen Horse, Inc. manufactures and distributes toy dinosaurs throughout the Western United States. Four (4) ounces of plastic are required to manufacture each ‘STEGOSAURUS’ toy dinosaur, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of the STEGOSAURUS toy occur. To keep production and sales moving smoothly, the company has the following inventory requirements: • The finished goods inventory on hand at the end of each month must equal 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 16,600 units. • The raw materials inventory on hand at the end of each month must equal 40% of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 96,000 ounces of plastic. • The company maintains no work in process inventories. A monthly sales budget for STEGOSUARUS toys for the third and fourth quarters of the year follows. Budgeted Unit Sales July 63,000 August 68,000 September 78,000 October 58,000 November 48,000 December 38,000 a. Prepare a production budget for STEGOSAURUS for the months July, August, September, and October. b. Prepare a direct materials (DM) budget showing the quantity of plastic (in ounces) to be purchased for each of the months of July, August, and September and for the third quarter in total.

Answer 1

Check the explanation

Step-by-step explanation:

RAW MATERIAL PURCHASE BUDGET

July Aug Sep Total

Budgeted

Production units 64,000 97,200 1,05,200 2,66,400 79,200

RM required per unit 4 4 4 4 4

Total

RM requirement 2,56,000 3,88,800 4,20,800 10,65,600 3,16,800

Add: Desired

Ending Inventory 1,55,520 1,68,320 1,26,720 1,26,720

Total needs 4,11,520 5,57,120 5,47,520 11,92,320

Less: Beginning

Inventory 96,000 1,55,520 1,68,320 96,000

Purchase Units 3,15,520 4,01,600 3,79,200 10,96,320

Kindly check the attached image below to see the well arranged accounting entry.