Question

1. Production and DM budgets: Stolen Horse, Inc. manufactures and distributes toy dinosaurs throughout the Western United States. Four (4) ounces of plastic are required to manufacture each ‘STEGOSAURUS’ toy dinosaur, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of the STEGOSAURUS toy occur. To keep production and sales moving smoothly, the company has the following inventory requirements: • The finished goods inventory on hand at the end of each month must equal 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 16,600 units. • The raw materials inventory on hand at the end of each month must equal 40% of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 96,000 ounces of plastic. • The company maintains no work in process inventories. A monthly sales budget for STEGOSUARUS toys for the third and fourth quarters of the year follows. Budgeted Unit Sales July 63,000 August 68,000 September 78,000 October 58,000 November 48,000 December 38,000 a. Prepare a production budget for STEGOSAURUS for the months July, August, September, and October. b. Prepare a direct materials (DM) budget showing the quantity of plastic (in ounces) to be purchased for each of the months of July, August, and September and for the third quarter in total.

Answer 1

Answer:

Check the explanation

Explanation:

RAW MATERIAL PURCHASE BUDGET    

                                         July             Aug  Sep  Total  

Budgeted

Production units  64,000  97,200  1,05,200  2,66,400  79,200

RM required per unit   4  4  4  4  4

Total

RM requirement  2,56,000 3,88,800  4,20,800   10,65,600  3,16,800

Add: Desired

Ending Inventory  1,55,520 1,68,320 1,26,720  1,26,720  

Total needs   4,11,520  5,57,120  5,47,520  11,92,320  

Less: Beginning

Inventory        96,000  1,55,520  1,68,320  96,000  

Purchase Units  3,15,520  4,01,600  3,79,200  10,96,320  

Kindly check the attached image below to see the well arranged accounting entry.