Rad Co. provides the following sales forecast and production budget for the next

Question

Rad Co. provides the following sales forecast and production budget for the next four months: The company plans for finished goods inventory of 150 units at the end of June. In addition, each finished unit requires five pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month's production needs. Beginning raw materials inventory for April was 705 pounds. Each finished unit requires 0.40 hours of direct labor at the rate of $19 per hour. The company budgets variable overhead at the rate of $23 per direct labor hour and budgets fixed overhead of $8,300 per month. Prepare a raw materials budget for April. May. and June.

Explanation / Answer

Statement showing computations Particulars April May June July Sales (Units)              530.00              610.00              560.00              630.00 Budgetd Production Units              470.00              600.00              570.00              570.00 Ending inventory = Beg of next month,              150.00              140.00              150.00 Beginning Inventory = Sales + Ending - Production or Ending Inv of prev month              210.00              150.00              140.00 Materials required for production = Units*5           2,350.00           3,000.00           2,850.00           2,850.00 Ending Raw Materials@30%              900.00              855.00              855.00 Beginning = Ending of previous Month              705.00              900.00              855.00 Materials to be purchased= Required+Ending-Beginning           2,545.00           2,955.00           2,850.00

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