Question

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,100 units in January, 12,600 units in February, and 13,700 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $4 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.

A: Prepare a projected budget for Jan and Feb 2020.
B: Prepare a direct material budget for Jan 2020.

Answer 1

Fuqua Company

Production budget

For the months of January and February 2020

January February

Projected sales 10,100 12,600

Desired ending inventory 2,520 2,740

Required production 12,620 15,340

Beginning inventory -2,020 -2,520

Units to be produced 10,600 12,820

Fuqua Company

Direct Materials budget

For the month of January 2020

January

Units to be produced 10,600

Direct materials per unit 3

Direct materials needed 31,800

Desired ending inventory 15,384

Beginning inventory -12,720

Direct materials purchases 34,464

Cost per pound $4

Direct materials' cost $137,856