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umka21 [38]
2 years ago
6

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,000 units in January, 12,000 units in February, and 13,000 u

nits in March. Each unit of part 198Z requires 4 pounds of materials, which cost $2 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.
Requried:
a. Prepare a projected budget for Jan and Feb 2017.
b. Prepare a direct material budget for Jan 2017.
Business
1 answer:
Troyanec [42]2 years ago
6 0

Answer:

Results are below.

Explanation:

<u>To calculate the production budget for January, we need to use the following formula:</u>

Production= sales + desired ending inventory - beginning inventory

January:

Production= 10,000 + (12,000*0.2)

Production= 12,400 units

February:

Production=  12,000 + 13,000*0.2 - (12,000*0.2)

Production= 12,200

<u>Now, the raw material budget:</u>

Purchases= production + desired ending inventory - beginning inventory

Purchases= 12,400*4 + (12,200*4)*0.4

Purchases= 69,120 pounds

Total cost= 69,120*2= $138,240

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