Fuqua Company’s sales budget projects unit sales of part 198Z of 10,800 units in

Question

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,800 units in January, 12,100 units in February, and 13,900 units in March. Each unit of part 198Z requires 2 pounds of materials, which cost $3 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, 2013.

Prepare a production budget for January and February 2014.

Prepare a direct materials budget for January 2014.

Explanation / Answer

Prepare a production budget for January and February 2014.

repare a direct materials budget for January 2014

January February Expected Unit Sales 10,800 12,100 Add: Desired Ending Finished Goods Inventory 2,420 2,780 Total Required Units 13,220 14,880 Less: Beginning Finished Goods Inventory 2,160 2,420 Required Production Units 11,060 12,460

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