2. Anderson Boxes makes cardboard boxes. For March and April, Anderson expects t
ID: 2584234 • Letter: 2
Question
2. Anderson Boxes makes cardboard boxes. For March and April, Anderson expects to produce 12,000 and 15,800 boxes respectively.
The primary material input for the boxes is cardboard. To make one box, Anderson budgets to use 12 linear feet of 2-foot wide cardboard at a cost of $0.75 per linear foot. Anderson expects to start March with 50,000 linear feet of 2-foor-wide cardboard, its direct materials policy is have 40% of the next month’s total inventory needs in ending inventory.
2-1. Prepare the cardboard purchases budget for March.
2-2. Prepare cardboard usage budget for March. Assume that the beginning inventory of cardboard is valued at $.75 per linear foot and that Anderson uses FIFO inventory cost flow.
2-3. Suppose that Anderson values the beginning inventory of cardboard at $0.70 per linear foot, but still expects to pay $0.75 per linear foot for March purchases. Assuming that Anderson uses a FIFO cost flow assumption, what is Anderson’s cardboard usage budget for March?
Explanation / Answer
2-1. Prepare the cardboard purchases budget for March.
2-2. Prepare cardboard usage budget for March. Assume that the beginning inventory of cardboard is valued at $.75 per linear foot and that Anderson uses FIFO inventory cost flow.
2-3. Suppose that Anderson values the beginning inventory of cardboard at $0.70 per linear foot, but still expects to pay $0.75 per linear foot for March purchases.
Purchase Budget for March Particulars Production to be done in March 12,000 boxes Usage of Cardboard per box 12 linear foot Total no. Cardboard to be used (12,000 x 12) 144,000 linear foot Add: Desired Closing Inventory (15,800 x 12 x 40%) 75,840 linear foot Total Cardboard Inventory Required 219,840 linear foot Less: Opeining Inventory 50,000 linear foot Total Cardboard required to be purchased 169,840 linear footRelated Questions
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