Profit Planning CISE 8-3 Direct Materials Budget [LO4] Inc. has developed a very

Question

Profit Planning CISE 8-3 Direct Materials Budget [LO4] Inc. has developed a very powerful electronic calculator. Each calculator requires three small "chips" that cost $2 each and are purchased from an overseas suppher. Micro Products has prepared a production budget for the calculator by quarters for Year 2 and for the first quarter of Year 3, as shown below: First Third Fourth First Budgeted production, in calculators 60,000 90,000 150,000 100,000 80,000 The chip used in production of the calculator is sometimes hard to get, so it is necessary to carry large inventories as a precaution against stockouts. For this reason, the inventory of chips at the end of a quarter must equal 20% of the following quarter's production needs. A total of 36,000 chips will be on hand to start the first quarter of Year 2. Required: Prepare a direct materials budget for chips, by quarter and in total, for Year 2. At the bottom of your budget, show the dollar amount of purchases for each quarter and for the year in total.

Explanation / Answer

RAW MATERIAL PURCHASE BUDGET Q-1 Q-2 Q-3 Q-4 YEAR Q1 Yr-3 Budgeted Production Units 60,000 90,000 150,000 100,000 400,000 80,000 RM Requirement per unit 3 3 3 3 3 3 Total Raw material required 180,000 270,000 450,000 300,000 1,200,000 240,000 Add: Desired Ending Inventory 54,000 90,000 60,000 48,000 48,000 Total needs 234,000 360,000 510,000 348,000 1,248,000 Less: Beginning Inventory 36,000 54,000 90,000 60,000 36,000 Budgeted Purchase in units 198,000 306,000 420,000 288,000 1,212,000 Budgeted Price per unit 2 2 2 2 2 Budgeted Purchases in $ 396,000 612,000 840,000 576,000 2,424,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.