Question

Preparing production budget and direct materials budget The sales department of P. Gillen Manufacturing Company has forecast sales in March to be 20,000 units. Additional information follows: Finished goods inventory, March 1 . ........................... 3,000 units Finished goods inventory required, March 31 .................. 1,000 units Materials used in production:

Required
Inventory Inventory Standard
March 1 March 31 Cost
A (one gallon per unit) . . . . . . . . . . . . . . 500 gal 1,000 gal $2 per gal
B (one pound per unit) . . . . . . . . . . . . . . 1,000 lb 1,000 lb $1 per lb
Prepare the following:__________.
a. A production budget for March (in units).
b. A direct materials budget for the month (in units and dollars).

Answer 1

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Answer 2

Production budget = 18,000 units

Material budget(units) :

Material A = 18,500 gallons

Material B = 18,000 pounds

Material budget($) $36,500

Step-by-step explanation:

The production budget = Sales + closing inventory - opening inventory

= 20,000 + 1000 - 3000= 18,000 units.

Production budget = 18,000 units

Material budget(units) :

Material budget = Material usage + closing inventory - opening inventory

Material A =( 18,000× 1 ) + 1000- 500= 18,500 gallons

Material B = (18,000× 1) + 1000 - 1000 = 18,000 pounds

Material budget($) :

Material A = 18,500 gallons × $2 per gallon = $18,500

Material B = 18,000 pounds × $1 per pound = $18,000

Total $36,500