C.J.\'s Cookie Company produces chocolate chip cookies. Raw materials inventory

Question

C.J.'s Cookie Company produces chocolate chip cookies.  Raw materials inventory includes a mix consisting of flour, sugar and chocolate chips at a standard cost of $5.00 per pound.  C.J. Uses 1/20 of a pound of raw materials per cookie.  C.J's anticipates quarterly sales for the first 3 quarters of 2012 as follows:

Budgeted Sales, 1st quarter 2012.........300,000 cookies

Budgeted Sales, 2nd quarter 2012........400,000 cookies

Budgeted sales, 3rd quarter 2012.........250,000 cookies

*materials needed for quarter 3 ...........16,250 lbs

Beginning finished goods inventory is 90,000 cookies.  Beginning raw materials inventory is 6,000 pounds.  Target raw materials is 40% of next quarter's materials needs.  Target finished goods inventory is 30% of next quarter's sales.

Required:

Prepare a production budget and a direct materials budget of C.J's Cookie Company for the first 2 quarters of 2012.

Explanation / Answer

For quarter1

Finished goods required= 300000-Inventory+ 30%(finshed goods of 2nd quarter)

=330000

Materials required for finished product quarter1=16500 lbs

total material required to = 16500+(40% of (400,000/20))

=24500

Budget=%5*24500=%122500

For quarter2

Finished goods required= 400000-Inventory+ 30%(finshed goods of 3rd quarter)

=400000-120000+75000=355000

Materials required for finished product quarter1=17750 lbs

total material required to = 17750+(40% of 16500)

=24350

Budget=$5*24350=$121750

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