Solution #1

Production Budget

Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7 sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five quarters are as follows:

	S12L7	S12L5
First quarter, 20Y1	800	1,300
Second quarter, 20Y1	2,200	1,400
Third quarter, 20Y1	5,600	5,300
Fourth quarter, 20Y1	4,600	3,900
First quarter, 20Y2	900	1,200

The vice president of sales believes that the projected sales are realistic and can be achieved by the company.

Stillwater Designs needs a production budget for each product (representing the amount that must be outsourced to manufacturers located in Asia). Beginning inventory of S12L7 for the first quarter of 20Y1 was 340 boxes. The company's policy is to have 20% of the next quarter's sales of S12L7 in ending inventory. Beginning inventory of S12L5 was 170 boxes. The company's policy is to have 30% of the next quarter's sales of S12L5 in ending inventory.

Required:Prepare a production budget for each quarter for 20Y1 and for the year in total. Enter amounts as positive numbers.

Solution # 2

Direct Materials Purchases Budget

Langer Company produces plastic items, including plastic housings for humidifiers. Each housing requires about 15 ounces of plastic costing $0.08 per ounce. Langer molds the plastic into the proper shape. Langer has budgeted production of the housings for the next 4 months as follows:

	Units
July	3,500
August	4,400
September	4,900
October	6,300

Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 20% of the following month's production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy.

Required:

Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total.

Stillwater Designs Sales Budget For the Year Ended December 31, 20Y1 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year S12L7: 8002,200 5,6004,60013,200 Price Sales S12L5 Units Price Sales Total sales 1,300|V 1.400 | 5,300 | | 3,900|V | 11,900| Langer Company Direct Materials Purchases Budget For July, August, and September July August September Total Units to be produced 3,5004,4004 4,90012,800V 15 15 15 15 Direct materials per unit (ounces) Production needs Desired ending inventory (ounces) Total needs Less: Beginning inventory Direct materials to be purchased (ounces) 52,50066,00073,500192,000v Cost per ounce $0.08 $0.08 $0.08 $0.08 Total purchase cost Stillwater Designs Sales Budget For the Year Ended December 31, 20Y1 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year S12L7: 8002,200 5,6004,60013,200 Price Sales S12L5 Units Price Sales Total sales 1,300|V 1.400 | 5,300 | | 3,900|V | 11,900| Langer Company Direct Materials Purchases Budget For July, August, and September July August September Total Units to be produced 3,5004,4004 4,90012,800V 15 15 15 15 Direct materials per unit (ounces) Production needs Desired ending inventory (ounces) Total needs Less: Beginning inventory Direct materials to be purchased (ounces) 52,50066,00073,500192,000v Cost per ounce $0.08 $0.08 $0.08 $0.08 Total purchase cost