Tempting Toys manufactures and distributes a number of products to retailers. On

Question

Tempting Toys manufactures and distributes a number of products to retailers. One of these products Playclay, requires five pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter-July, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements The finished goods inventory on hand at the end of each month must be equal to 9,000 units plus 28% of the next month's sales. The finished goods inventory on June 30 is budgeted to be as expected b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following C. The company maintains no work in process inventories A sales budget for Playclay for the last six months of the year follows month's production needs for raw materials. The raw materials inventory on June 30 for material A135 is budgeted to be as expected Budgeted Sales in Units July August September October November December 50,000 60,000 80,000 45,000 30,000 20,000 Required: 1. Prepare a production budget for Playclay for the months July, August, September, and October. Playclay Production Budget July August September October Budgeted sales Deduct: Beginning inventory Total needs Add: Ending inventory Required production 50,000 60,000 80,000 45,000

Explanation / Answer

Opening Inventory(Finished Goods) in July month=Cosing Inventory in June Month=9,000+28%Juy month sales=9,000*28%*50,000

=23,000

Raw Material opening Inventory=1/2*(July month production needs)=52,800*.5=26,400

Play Cay Production Budget Particulars July Aug Sep Oct Budgeted Sales         50,000        60,000        80,000        45,000 Deduct:Beginnning Inventory         23,000        25,800        31,400        21,600 Total needs         27,000        34,200        48,600        23,400 Add:Ending Inventory         25,800        31,400        21,600        17,400 Required Production         52,800        65,600        70,200        40,800 Play Cay Direct Material Budget Particulars July Aug Sep Total Production Needs     2,64,000     3,28,000     3,51,000     9,43,000 Deduct:Beginnning Inventory     1,32,000     1,64,000     1,75,500     4,71,500 Total needs     1,32,000     1,64,000     1,75,500     4,71,500 Add:Ending Inventory     1,64,000     1,75,500     1,02,000     4,41,500 Required Production     2,96,000     3,39,500     2,77,500     9,13,000

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