Question

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,100 units in January, 12,600 units in February, and 13,700 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $4 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.
A: Prepare a projected budget for Jan and Feb 2020.
B: Prepare a direct material budget for Jan 2020.

Answer 1

Answer:

                       Fuqua Company

                      Production budget

   For the months of January and February 2020

                                                 January               February

Projected sales                        10,100                  12,600

Desired ending inventory       2,520                    2,740  

Required production              12,620                   15,340

Beginning inventory              -2,020                   -2,520  

Units to be produced             10,600                  12,820

              Fuqua Company

         Direct Materials budget

   For the month of January 2020

                                                    January              

Units to be produced                  10,600              

Direct materials per unit                      3  

Direct materials needed             31,800

Desired ending inventory           15,384

Beginning inventory                  -12,720  

Direct materials purchases        34,464

Cost per pound                                  $4  

Direct materials' cost              $137,856