Required information Ruiz Co. provides the following sales forecast for the next

Question

Required information

Ruiz Co. provides the following sales forecast for the next four months:

   

The company wants to end each month with ending finished goods inventory equal to 40% of next month's forecasted sales. Finished goods inventory on April 1 is 264 units. Assume July's budgeted production is 690 units. In addition, each finished unit requires five pounds (lbs.) 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 1,038 pounds. Assume direct materials cost $4 per pound.

April May June July Sales (units) 660 740 690 780

Explanation / Answer

3,460

[ (660*60%*5) + (740*40%*5) ]

3,600

[ (740*60%*5) + (690*40%*5) ]

3,630

[ (690*60%*5) + (780*40%*5) ]

PARTICULARS APRIL MAY JUNE Materials needed for production (lbs.)

3,460

[ (660*60%*5) + (740*40%*5) ]

3,600

[ (740*60%*5) + (690*40%*5) ]

3,630

[ (690*60%*5) + (780*40%*5) ]

Total materials requirements (lbs.) at the end of the month 1,080 1,089 1,035 Materials to be purchased (lbs.) 3,502 3,609 3,576 Total budgeted direct materials cost $ 14,008 $ 14,436 $ 14,304

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