Do It! Review 9-2 Pargo Company is preparing its master budget for 2017. Relevan

Question

Do It! Review 9-2

Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales. Sales for the year are expected to total 1,800,000 units. Quarterly sales are 18%, 25%, 25%, and 32%, respectively. The sales price is expected to be $39 per unit for the first three quarters and $43 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 15% higher than the budgeted sales for the first quarter of 2017.

Production. Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted sales volume.

Direct materials. Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are 509,000 pounds.

Prepare the sales, production, and direct materials budgets by quarters for 2017.

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Q1 Q2 Q3 Q4 Total Q1 Next year Sales in % 18% 25% 25% 32% 100% Sales in units          324,000.00          450,000.00          450,000.00          576,000.00      1,800,000.00         372,600.00 Sales price per unit                     39.00                     39.00                     39.00                     43.00 Sales in $    12,636,000.00    17,550,000.00    17,550,000.00    24,768,000.00 Sales in units          324,000.00          450,000.00          450,000.00          576,000.00      1,800,000.00         372,600.00 Ending inventory          112,500.00          112,500.00          144,000.00            93,150.00            93,150.00 Beginning inventory            81,000.00          112,500.00          112,500.00          144,000.00            81,000.00 Production in units = Sales + ending - beginning          355,500.00          450,000.00          481,500.00          525,150.00      1,812,150.00         509,000.00 Materials required for prod=Prod*2          711,000.00          900,000.00          963,000.00      1,050,300.00      1,018,000.00 Ending inventory =10%*Next q Prod            90,000.00            96,300.00          105,030.00          101,800.00 Beginning Inventory            71,100.00            90,000.00            96,300.00          105,030.00 Purchases = Production+Ending - beginning          729,900.00          906,300.00          971,730.00      1,047,070.00 Price per pound                     10.00                     10.00                     10.00                     10.00 Purchases in $      7,299,000.00      9,063,000.00      9,717,300.00    10,470,700.00

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