Fuqua Company’s sales budget projects unit sales of part 198Z of 10,300 units in

Question

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,300 units in January, 12,600 units in February, and 13,800 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, 2016.

Prepare a production budget for January and February 2017.

                                                                        FUQUA COMPANY
                                                                       Production Budget         

Prepare a direct materials budget for January 2017                                 

Explanation / Answer

Particulars January February Opening Inventory of finished goods 2060 2520 Units sold during the year 10300 12600 Closing Inventory 2520 2760 Direct materials budget Units Produced 10760 12840 Direct material required in production 32280 38520 Opening Inventory 12912 15408 Closing Inventory 15408 13248 Direct Materials Purchased 34776 36360

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