Any help is greatly appreciated. I would love to see how you got expected figures, as this is quite confusing to me. I want to make sure I understand when my exam comes around. Thank you!

On 6.20 - I would like to understand better, please, how to get the figures in the 2nd line (ending inventory).

On 6.26 - I am confused on how they got the last figure (expected cost of direct material).

On the last question, I am just lost. Thanks!

Exercise 6.20 (page 175): Otto Enterprises produces ceiling fans for industrial use. Otto estimates quarterly sales of 50,000; 45,000; 60,000; 55,000; and 65,000 for the next five quarters. Otto desires an ending finished goods inventory equal to 10 percent of the expected sales in the next quarter. Otto Enterprises currently has an inventory of 10,000 ceiling fans. How many ceiling fans should Otto produce each quarter next year?

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 5

Sales 50,000 + 45,000 + 60,000+ 55,000+ =210,000

+ ending inventory 4,500+ 6,000+ 5,500+ 6,500+ =22,500

-beginning inventory 10,000 + 4,500+ 6,000+ 5,500+ =26,000

= Production 44,500 46,500 59,500 56,000 206,500

Exercise 6.26 (page 175): Schuh, Inc. plans to produce 6,000 units in Month One and 7,000 units in Month Two. Each unit requires 3 pounds of direct materials that can be purchased for $2 per pound. At the beginning of Month One there are 2,000 pounds of direct materials on hand. Schuh desires an ending inventory of direct materials equal to 10 percent of the next month%u2019s direct materials needs. What is the expected cost of direct materials purchased for Month One?

Month 1

Production 6,000.00

Direct materials required 6,000 units * 3# 18,000.00

Add: Ending Inventory (10% of month 2 material 15,000) 1,500.00

Less: Beginning Inventory of Materials (2,000.00)

Material to be purchased: 17,500.00

Expected Cost of Direct Materials: $35,000.00

Problem 6.6 (page 176): Frausto, Inc., plans to produce 22,000; 24,000; 26,000; 28,000; 30,000; and 32,000 units for the first six months, respectively, of the coming year. Each unit requires 2 liters of direct materials that cost $3 per liter. Frausto indicates that the beginning inventory of direct materials is 5,000 liters, but Frausto wants to reduce inventory to 5 percent of what is needed for the next month%u2019s production. Frausto pays for 70 percent of its purchase in the month of purchase, taking a 3 percent discount. The remaining purchases are paid in the month following purchase. Frausto indicates that the beginning accounts payable balance is $24,000. Each unit requires one-half hour of direct labor time at $15 per hour. Unit-related overhead is $5 per machine hour and each unit requires 3 machine hours. Batch-related overhead is $1,600 per batch with a batch-size of 500 units. Facility overhead, including depreciation of $7,000, is $35,000 per month. Prepare Frausto%u2019s direct labor and manufacturing overhead budget by month for the first fiscal quarter.