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On January 1, 2020, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2020.


Sales units: First quarter 5,800; second quarter 6,700; third quarter 7,200.
Ending raw materials inventory: 40% of the next quarter’s production requirements.
Ending finished goods inventory: 25% of the next quarter’s expected sales units.
Third-quarter production: 7,800 units.

The ending raw materials and finished goods inventories at December 31, 2019, follow the same percentage relationships to production and sales that occur in 2020. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound.

Required:
Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017.

Respuesta :

akiran007

Answer:

Direct Material Purchases pounds for the two quarters  24300 lbs and 28860lbs

Direct Materials ($)  for the two quarters  $  121500        $ 144300

Explanation:

First we calculate the production budget to  find out the direct Material usage during the quarter. The ending inventories are calculated by taking 25% of the next quarter's sales. Also the ending inventory of one quarter is the beg. inventory of the next quarter.

Production = Sales + Ending Inventory - Opening Inventory

Hardin Company

Production Units Budget

For the quarters of the 6-month period ended June 30, 2017

                                                    Quarters

                                                            1                   2                3               4

Sales Units                                   5800           6700            7200      

+ Desired Ending Inventory        1675            1800

Less Opening Inventory               1450            1675              1800

Production Units                            5575         6825               7800 (given)

Now we find the production units in pounds by multiplying the production units with pound per unit. Then we find the direct materials purchases in pounds and in dollars.

Direct Materials  = Production + Ending Inventory - Opening Inventory

The ending inventories are calculated by taking 40% of the next quarter's production requirements. Also the ending inventory of one quarter is the beg. inventory of the next quarter.

Hardin Company

Direct Materials Budget

For the quarters of the 6-month period ended June 30, 2017

                                                    Quarters

                                                            1                   2                      3         Production Units                                 5575         6825             7800      

D. Materials per unit                             4                 4                   4

D. Materials (pounds)                         22300        27300         31200  

Add Desired Ending Inventory        10920          12480

Less Opening Inventory                   8920           10920

Direct Material Purchases pounds  24300         28860

Direct Materials ($)                              5                  5

Direct Materials ($)                         $  121500        $ 144300

   

                   

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