Homework SourseBugAway PL produces and sells insect repellent Information a
BugAway P/L produces and sells insect repellent. Information about the budget for the year 2015/2016 is as follows . The company expects to sell 40,000 bottles of BugAway in the first quarter, 50,000 bottles in the second quarter, 93,000 in the third quarter, and 36,000 in the fourth quarter A bottle of BugAway requires 200 g of Chemical A and 300 g of Chemical B * The desired ending inventory of finished product is equal to 20 percent of the next quarter\'s sales whereas the desired ending inventory for (raw) material is 15 percent of the next quarter\'s production requirements . At the end of the present quarter (Q4 2014/2015) it is expected that there will be 11,000 . At the end of the budget fourth quarter, the company desires to have 12,000 bottles of The cost of chemical A is $3.60 per kg, the cost of Chemical B is $2.70 per kg, and the bottles of BugAway, 1,900 kg of Chemical A and 2,900 kg of Chemical B on hand. BugAway, 2,000 kg of Chemical A and 3,400 kg of Chemical B selling price of BugAway is $9.95 per bottle. It is expected that these figures will remain static over the next twelve months (a) Prepare a production budget for each quarter of 2015/2016 (b) Prepare a materials purchase budget for each quarter of 2015/2016
Solution
a) Production Budget for each quarter of 2015/2016
b) Material Purchases budget for Chemical A (Amounts in $)
Material Purchases budget for Chemical B (Amounts in $)
| Particulars | Qtr 1 | Qtr 2 | Qtr 3 | Qtr 4 |
| Expected Sales (in bottles) | 40,000 | 50,000 | 93,000 | 36,000 |
| Add: Desired Ending Inventory (20% of next Qtr sales) | 10,000 | 18,600 | 7,200 | 12,000 |
| Less: Beginning Inventory | (11,000) | (10,000) | (18,600) | (7,200) |
| Required Production of Finished Product (a) | 39,000 | 58,600 | 81,600 | 40,800 |
| Chemical A required per bottel (in kg) (1 kg = 1,000 grams) (b) | 0.20 | 0.20 | 0.20 | 0.20 |
| Required production of Chemical A (a*b) | 7,800 | 11,720 | 16,320 | 8,160 |
| Chemical B required per bottel (in kg) (1 kg = 1,000 grams) (c) | 0.30 | 0.30 | 0.30 | 0.30 |
| Required production of Chemical B (a*c) | 11,700 | 17,580 | 24,480 | 12,240 |
