Tyson Chandler Company’s sales budget projects unit sales of part 198Z of 10,0

Question

Tyson Chandler Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 2 pounds of materials, which cost $3 per pound. Tyson Chandler 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 25% of the next month’s expected unit sales. These goals were met at December 31, 2009.

Instructions
(a) Prepare a production budget for January and February 2010.
(b) Prepare a direct materials budget for January 2010.

Explanation / Answer

Production Budget January Feburary March Sales Unit 10000 12000 13000 Opening Stock of Finished Good 2500 3000 3250 Closing Stock of Finished Good 3000 3250 0 Production 10500 12250 9750 Direct Material Budget Production 10500 12250 9750 Raw Material Required 21000 24500 19500 Opening Stock of Raw Material 8400 9800 7800 Closing Stock of Raw Material 9800 7800 0 Purchase Raw Material (in Pounds) 22400 22500 Purchase (in $) 67200 67500

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