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The following information relates to a company that produces a single product. -20 Each unit requires two pounds of material. Inventory requirements are as follows:
The following information relates to a company that produces a single product. -20 Each unit requires two pounds of material. Inventory requirements are as follows: a. The finished goods inventory on hand at the end of each month must be equal to 4,000 units plus 25% of the next month's sales. The finished goods inventory on December 31 is budgeted based on this requirement. b. The raw materials inventory on hand at the end of each month must be equal to one half of the following month's production needs for raw materials. The raw materials inventory on December 31 is budgeted based on this requirement. c. The company maintains no work in process inventories. A sales budget for the company for the first and second quarters of the upcoming year follows January February March April May June Budgeted Sales in Units 40,000 50,000 70,000 35,000 20.000 10,000 3. Prepare a direct materials budget showing the quantity of material to be purchased for January February, March and for the quarter in total. Direct Materials Budget January February March First Quarter 55,000 61,250 31,250 31 250 Production needs (lbs) Add. Ending inventory Total Material needs Deduct. Beginning inventory Material purchases
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