Safe’ n’ Bright, inc., produces outside doors forinstallation on homes. The foll

Question

Safe’ n’ Bright, inc., produces outside doors forinstallation on homes. The following information was gathered toprepare budgets for the upcoming year beginning January 1:

           Sales forecast inunits………………………………………………………5,500doors

           Finished goods inventory, Jan.1……………………………………………620doors

           Target finished goods inventory, Dec.31…………………………………480doors

           Raw materials inventory—steel, Jan1……………………………………40,000pounds

           Target inventory—steel, Dec.31…………………………………………80,000pounds

           Raw materials inventory—glass, Jan.1…………………………………6,000square feet

           Target inventory—glass, Dec.31………………………………………4,000square feet

           Budgeted purchaseprice—steel…………………………………………$4per pound

           Budgeted purchaseprice—glass………………………………………$2per square foot

The manufacture of each door requires 20 pounds of steel and 6square feet of glass.

Explanation / Answer

Prepare the production schedule in units for safe‘n’ Bright.
=============================================
Production Shedule (units) ==================== Salesforecast                                                5,500doors Add: Target finish inventory Dec.31                 480doors                      Total unitsrequired                              5,980 doors   Less; Finished good Inventory, Jan1                620doors    RequiredProduction                               5,360 doors Using the production schedule, develop the directmaterials purchase budgets for steel and glass. =======================================================================                                                                   Steel                   Glass Each doorrequires                                    20pounds                 6square feet Materialsrequired                                    20x5360                  6x 5360                                                              107,200pounds         32,160square feet Add: Target Inventory Dec.31                 80,000pounds            4,000square feet    Total materialsrequired                 187,200 pounds          36,160square feet Less : Inventory on Jan1                        40,000pounds             6,000square feet    Materials to bepurchased            147,200pounds           30,160square feet Materials cost perunit                              $4                                 $2 Total cost of materialspurchased     $588,800                     $60,320 Why might safe ‘n’ Blight’s targetlevel of steel inventory be higher than last year’s endingbalance and its
target level of glass inventory be lower than last year’sending balance? ================================================================================ 1) There might be a change in design requiring moresteel materials and less glass materials 2) There migh be anticipated a prise rise in the procurementprice of steel materials and glass materials remain at the sameprice. 3) new entrants of glass manufacturer into the market offeringcompetitive price and delivery schedule.

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