Question
Green & Clean produces and sells organic concentrated detergent. Information about the budget for 2017 is as follows: 1. The company expects to sell 50,000
Green & Clean produces and sells organic concentrated detergent. Information about the budget for 2017 is as follows:
1. The company expects to sell 50,000 bottles of detergent in the first quarter, 70,000 in the second quarter, 95,000 in the third quarter, and 46,000 in the fourth quarter.
2. A bottle of detergent requires 5 ounces of Chemical A and 12 ounces of Chemical B.
3. The desired ending inventory of finished goods is equal to 15% of next quarters sales, whereas the desired ending inventory for material is 10% of next quarters production requirements.
4. There are 7,500 bottles of detergent, 25,000 ounces of Chemical A, and 60,000 ounces of Chemical B on hand at the beginning of the first quarter.
5. At the end of the fourth quarter, the company must have 10,000 bottles of detergent, 24,000 ounces of Chemical A, and 90,000 ounces of Chemical B to meet its needs in the first quarter of 2018.
6. The cost of Chemical A is $0.12 per ounce, the cost of Chemical B is $0.08 per ounce, and the selling price of the detergent is $11.50 per bottle.
7. The cost of direct labor is $0.80 per bottle, and the cost of variable overhead is $1.20 per bottle. Fixed manufacturing overhead is $50,000 per quarter.
8. Variable selling and administrative expense is 5% of sales, and fixed selling and administrative expenses are $60,000 per quarter.
Prepare a material purchases budget for Chemical A for the third quarter of 2017. Assume the production for the fourth quarter is 49,100 units.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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