1. The preparation of the direct materials purchases budget for June for Palm Imagination is as follows:
<h3>Direct materials purchases budget </h3>
June
Budgeted production 26,570
Production materials 21,256
Inventory of Fabric:
Ending Materials 3,226
Production materials 21,256
Materials available 24,482
Beginning Materials 3,188
Unit Purchases 21,294 yards
Cost of purchases $42,588 ($21,294 x $2)
2. The amounts of Raw Materials and Finished Goods Inventory to be reported on Palm Imagination’s June 30 balance sheet are as follows:
Ending inventory of raw materials = $6,452.
Ending inventory of finished goods = $104,576.75.
<h3>Data and Calculations:</h3>
Silk Fabric per tree = 0.80 yards
April May June July August
Budgeted production 24,160 23,490 26,570 26,880 22,900
Production materials 19,328 18,792 21,256 21,504 18,320
Inventory of Fabric:
Ending Materials 2,819 3,188 3,226 2,748
Production materials 19,328 18,792 21,256 21,504 18,320
Materials available 22,147 21,980 24,482 24,252
Beginning Materials 2,899 2,819 3,188 3,226 2,748
Purchases 19,248 19,161 21,294 21,026
Cost of purchases $38,496 $38,322 $42,588 $42,052
April May June July August
Budgeted sales 24,500 22,800 26,250 27,850 23,000
<h3>Finished Goods:</h3>
Ending inventory 4,560 5,250 5,570 4,600
Budgeted sales 24,500 22,800 26,250 27,850 23,000
Goods available 29,060 28,050 31,820 32,450
Beginning inventory 4,900 4,560 5,250 5,570 4,600
Production units 24,160 23,490 26,570 26,880
<h3>Raw materials costs for June:</h3>
Required production materials = 21,256
Total cost of materials = $42,512 (21,256 x $2)
Direct labor costs = $327,342.40 ($14 x 21,256 x 1.1)
Factory overhead costs = $29,227 ($1.25 x 23,381.60 hours)
Total production costs = $399,081.40
Unit production cost = $18.775 ($399,081.40/21,256)
Ending inventory of finished goods = $104,576.75 ($18.775 x 5,570)
Ending inventory of raw materials = $6,452 (3,226 x $2.00)
<h3>Question Completion:</h3>
April May June July August
Budgeted production 24,160 23,490 26,570 26,880 22,900
Budgeted sales 24,500 22,800 26,250 27,850 23,000
The company wants to maintain monthly ending inventories of fabric equal to 15% of the following month's budgeted production needs, and monthly inventories of trees equal to 20% of the number needed for next month’s sales. The cost of silk is $2.00 per yard. Direct labor cost is $14.00 per hour and it takes 66 minutes to complete each tree. Factory overhead is applied at the rate of $1.25 per direct labor dollar.
Prepare a direct materials purchases budget for June.
Calculate the amount of Raw Materials and Finished Goods Inventory to be reported on Palm Imagination’s June 30 balance sheet.
Thus, the direct materials purchases budget for June has been prepared and the amounts of Raw Materials and Finished Goods Inventory reported on Palm Imagination’s June 30 balance sheet are indicated above.
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