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A sales budget is given below for one of the products manufactured by the OMI Co.:

January 25,000 units
February 40,000 units
March 65,000 units
April 45,000 units
May 35,000 units
June 30,000 units

The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31, the finished goods inventory totaled only 4,000 units. Each unit of product requires three kilograms of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.
Required:
Prepare a budget showing the quantity of material to be purchased each month for January, February, and March, and in total for the quarter.

Respuesta :

TomShelby

Answer:

[tex]\left[\begin{array}{ccccc}&$January&$February&$March&$Total\\$sales&25,000&40,000&65,000&130,000\\$Desired ending&8,000&13,000&9,000&9,000\\$Total Needs&33,000&53,000&74,000&139,000\\$beginning&4,000&8,000&13,000&-4,000\\$Production Requirement&29,000&45,000&61,000&135,000\\\end{array}\right][/tex]

Explanation:

The desired eaning will be calcualte based on next month sales:

40,000 x 20%

65,000 x 20%

45,000 x 20%

The beginning inventory will be the ending inventory of the pprevious months

The total production requirement will be

sales + desired ending - expected beginning inventory

Zviko

Answer:

Purchase Budget per Month

                                                             January          February           March

Materials Required 3kg per unit          87,000           135,000         183,000

Add Budgeted Closing Stock              40,500            54,900           35,100

Total Purchases needed                     127,500            189,900         218,100

Less Budgeted Opening Stock               0                  (40,500)        (54,900)

Budgeted Purchases                          127,500             149,400         163,200

Total Purchases for the Quarter  = 440,100

Explanation:

First determine Production Budget per Month

                                                             January          February           March

Budgeted Sales                                    25,000            40,000           65,000

Add Budgeted Closing Stock                8,000             13,000             9,000

Total Production Needed                    33,000             53,000           74,000

Less Budgeted Opening Stock           (4,000)              (8,000)          (13,000)

Budgeted Production                           29,000            45,000           61,000

Next, Purchase Budget per Month

                                                             January          February           March

Budgeted Production                           29,000            45,000           61,000

Materials Required 3kg per unit          87,000           135,000         183,000

Add Budgeted Closing Stock              40,500            54,900           35,100

Total Purchases needed                     127,500            189,900         218,100

Less Budgeted Opening Stock               0                  (40,500)        (54,900)

Budgeted Purchases                          127,500             149,400         163,200

Total Purchases for the Quarter = 127,500+149,400+163,200 = 440,100