*Exercise 21-8 Fuqua Company’s sales budget projects unit sales of part 198Z of
ID: 2508635 • Letter: #
Question
*Exercise 21-8
Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $2 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, 2016.
Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $2 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, 2016.
Explanation / Answer
Direct material budget :
January Unit to be produced 10400 Direct material pounds per unit 4 Total pounds needed for production 41600 Add: Desired pounds in ending material inventory (12200*4*40%) 19520 Total materials required 61120 Less: Beginning direct material (41600*40%) (16640) Direct material purchase 44480 Cost per pound 2 Total cost of direct materials purchases 88960Related Questions
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