Bosworth Boxes makes cardboard boxes. For March and April, Bosworth expects to p
ID: 2455750 • Letter: B
Question
Bosworth Boxes makes cardboard boxes. For March and April, Bosworth expects to produce 12,000 and 15,800 boxes, respectively. The main material input for Bosworth’s boxes is cardboard. To make one box, Bosworth budgets to use 12 linear feet of 2-foot-wide cardboard at a cost of $0.75 per linear foot. Further, while Bosworth expects to begin March with 50,000 linear feet of 2-foot-wide cardboard, its direct materials inventory policy is to have 40 percent of the next month’s total material needs in ending inventory.
Required:
a. Prepare Bosworth Boxes cardboard purchases budget for March.
b. Prepare Bosworth Boxes cardboard usage budget for March. Assume that Bosworth Boxes beginning inventory of cardboard is also valued at $0.75 per linear foot and that Bosworth uses the First-In-First-Out (FIFO) inventory method.
c. (Appendix) Suppose Bosworth values its beginning inventory of cardboard at $0.70 per linear foot, but still expects to pay $0.75 per linear foot for March purchases. Assuming Bosworth uses a FIFO cost flow assumption, what is Bosworth’s cardboard usage budget for March?
Explanation / Answer
a.
Bosworth Boxes cardboard purchases budget for March:
March
April
Expected Production (Boxes)
12,000
15,800
Cardboard required for one box (Linear Feet)
12
12
Cardboard required for Production of Boxes (Linear Feet)
144,000
189,600
(12000*12)
(15800*12)
Add: Ending Cardboard Inventory
75,840
(40 percent of the next month’s total material needs)
(189600*40%)
Add: Beginning Cardboard Inventory
(50,000)
Budgeted Cardboard Purchase (Linear feet)
169,840
Cost pet linear Feet
$0.75
Budgeted Cost of Cardboard Purchase = 169840*0.75
$127,380
b.
Bosworth Boxes cardboard usage budget for March (Using FIFO)
Total Usage (Feet)
144000
Cost of Beginning inventory used = 50000 Linear Feet*$0.75
$ 37,500.00
Cost of Purchased inventory used = (144000- 50000) Linear Feet *$0.75
$ 70,500.00
Cardboard usage budget for March =
$ 108,000.00
c.
Bosworth Boxes cardboard usage budget for March (Using FIFO)
Total Usage (Feet)
144000
Cost of Beginning inventory used = 50000 Linear Feet*$0.70
$ 35,000.00
Cost of Purchased inventory used = (144000- 50000) Linear Feet *$0.75
$ 70,500.00
Cardboard usage budget for March =
$ 105,500.00
a.
Bosworth Boxes cardboard purchases budget for March:
March
April
Expected Production (Boxes)
12,000
15,800
Cardboard required for one box (Linear Feet)
12
12
Cardboard required for Production of Boxes (Linear Feet)
144,000
189,600
(12000*12)
(15800*12)
Add: Ending Cardboard Inventory
75,840
(40 percent of the next month’s total material needs)
(189600*40%)
Add: Beginning Cardboard Inventory
(50,000)
Budgeted Cardboard Purchase (Linear feet)
169,840
Cost pet linear Feet
$0.75
Budgeted Cost of Cardboard Purchase = 169840*0.75
$127,380
b.
Bosworth Boxes cardboard usage budget for March (Using FIFO)
Total Usage (Feet)
144000
Cost of Beginning inventory used = 50000 Linear Feet*$0.75
$ 37,500.00
Cost of Purchased inventory used = (144000- 50000) Linear Feet *$0.75
$ 70,500.00
Cardboard usage budget for March =
$ 108,000.00
c.
Bosworth Boxes cardboard usage budget for March (Using FIFO)
Total Usage (Feet)
144000
Cost of Beginning inventory used = 50000 Linear Feet*$0.70
$ 35,000.00
Cost of Purchased inventory used = (144000- 50000) Linear Feet *$0.75
$ 70,500.00
Cardboard usage budget for March =
$ 105,500.00
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