Budget Seafood Inc. produces shrimp in cans. The sales budget for the first four

Question

Budget

Seafood Inc. produces shrimp in cans. The sales budget for the first four months of the year is as follows: Company policy requires that ending inventories for each month be 35 percent of next month's sales. At the beginning of January, the inventory of shrimp is 36,000 cans. Each can of shrimp needs two raw materials: four ounces of shrimp and one can. Company policy requires that ending inventories of raw materials for each month be 20 percent of the next month's production needs. That policy was met on January 1. Prepare a production budget for each month in the first quarter of the year. Show the number of cans that should be produced each month as well as for the quarter in total. Prepare separate direct materials purchases budgets for cans and for shrimp for the months of January and February.

Explanation / Answer

Details Jan Feb Mar Apr Ans 1 Unit Sales 2,00,000.00     2,40,000.00 2,20,000.00 2,00,000.00 Desired Inventory 35% of nex month sales      70,000.00        84,000.00      77,000.00      70,000.00 Total requirements 2,70,000.00     3,24,000.00 2,97,000.00 2,70,000.00 Less Opening Inventory      36,000.00        70,000.00      84,000.00      77,000.00 Production requirement 2,34,000.00     2,54,000.00 2,13,000.00 1,93,000.00 Ans 2 Shrimp -Material Purchase Budget in Ounces Jan Feb Mar Apr Production requirement 9,36,000.00 10,16,000.00 8,52,000.00 7,72,000.00 Desired ending Inventory 2,03,200.00     1,70,400.00 1,54,400.00                     -   Less Opening Inventory 1,87,200.00     2,03,200.00 1,70,400.00 1,54,400.00 Required Purchase 9,52,000.00     9,83,200.00 8,36,000.00 6,17,600.00 Can-Material Purchase Budget in Numbers Production requirement 2,34,000.00     2,54,000.00 2,13,000.00 1,93,000.00 Desired ending Inventory      50,800.00        42,600.00      38,600.00                     -   Less Opening Inventory      46,800.00        50,800.00      42,600.00      38,600.00 Required Purchase 2,38,000.00     2,45,800.00 2,09,000.00 1,54,400.00

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