Question
Exercise 7-13 Production and Direct Materials Budgets [LO3, LO4] Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playclay,
Exercise 7-13 Production and Direct Materials Budgets [LO3, LO4]
| Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires five pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarterJuly, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements: |
| a. | The finished goods inventory on hand at the end of each month must be equal to 5,000 units plus 35% of the next months sales. The finished goods inventory on June 30 is budgeted to be 18,650 units. |
| b. | The raw materials inventory on hand at the end of each month must be equal to one-half of the following months production needs for raw materials. The raw materials inventory on June 30 for material A135 is budgeted to be 106,250 pounds. |
| c. | The company maintains no work in process inventories. |
| A sales budget for Playclay for the last six months of the year follows. |
| Budgeted Sales in Units | |
| July | 39,000 |
| August | 49,000 |
| September | 69,000 |
| October | 34,000 |
| November | 19,000 |
| December | 9,000 |
| Required: | |
| 1. | Prepare a production budget for Playclay for the months July, August, September, and October. (Input all amounts as positive values. Do not round intermediate calculations.) |
| Playclay Production Budget | ||||
| July | August | September | October | |
| Budgeted sales | ||||
| (Click to select)DeductAdd: (Click to select)Beginning inventoryEnding inventory | ||||
| Total needs | ||||
| (Click to select)AddDeduct: (Click to select)Beginning inventoryEnding inventory | ||||
| Required production | ||||
| 3. | Prepare a direct materials budget showing the quantity of material A135 to be purchased for July, August, and September and for the quarter in total. (Input all amounts as positive values. Do not round intermediate calculations.) |
| Playclay Direct Materials Budget | ||||
| July | August | September | Third Quarter | |
| Production needs | ||||
| (Click to select)AddDeduct: (Click to select)Ending inventoryBeginning inventory | ||||
| Total Material A135 needs | ||||
| (Click to select)AddDeduct: (Click to select)Ending inventory Beginning inventory | ||||
| Material A135 purchases | ||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started