Question
Super Kitchen Limited uses five grams of PVC are need for each lunch box bag. The cost of PVC is $4.5 per gram. Budgeted production
Super Kitchen Limited uses five grams of PVC are need for each lunch box bag. The cost of PVC is $4.5 per gram. Budgeted production of the lunch box bags is given below by quarters for Year 2 and for the first quarter of Year 3:
Year 2
Budgeted production in bags First: 80,000 Second:120,000 Third:140,000 Fourth: 160,000
Year 3
First: 150,000
PVC is a usual raw material and it is better to stock up some inventories as a safety against stock- outs. So, inventory of PVC at the end of a quarter must be equal to 20% of the following quarters production needs. Certain 110,000 grams of PVC will be on hand to start the first quarter of Year 2.
Required: Prepare a full direct materials budget for PVC by quarters and in total, for Year 2 with 9 rows up to Cost of raw materials to be purchased.
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