Croy Inc. has the following projected sales for the next five months: Croy’s fin

Question

Croy Inc. has the following projected sales for the next five months:   

Croy’s finished goods inventory policy is to have 50 percent of the next month’s sales on hand at the end of each month. Direct material costs $3.30 per pound, and each unit requires 2 pounds. Raw materials inventory policy is to have 50 percent of the next month’s production needs on hand at the end of each month. Raw materials on hand at March 31 totaled 3,708 pounds.     

Required:

1. Determine budgeted production for April, May, and June.

2. Determine the budgeted cost of materials purchased for April, May, and June.

Month Sales in Units April 3,580 May 3,835 June 4,600 July 4,150 August 3,930

Explanation / Answer

2) Determine the budgeted cost of materials purchased for April, May, and June.

April May June Production units 3708 4218 4375 Pound per unit 2 2 2 Raw material for production 7416 8436 8750 Add: Desired ending inventory 4218 4375 4040 Total needs 11634 12811 12790 Less: Beginning inventory (3708) (4218) (4375) Raw material purchase 7926 8593 8415 Cost per pound 3.30 3.30 3.30 Raw material purchase cost 26155.80 28356.90 27769.50

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