On January 1 2017 the Hardin Company budget committee has re

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017 Sales units Ending raw materials inventory: 40% of the next quarter\'s production requirements Ending finished goods inventory: 25% of the next quarter\'s expected sales units Third-quarter production: First quarter 5,800; second quarter 6,700; third quarter 7,200 7,800 units The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound Prepare a production budget by quarters for the 6-month period ended June 30, 2017. HARDIN COMPANY Production Budget Quarter

Solution

Answers

Working

Working

Q1

Q2

A

Next quarter budgeted sales

6700

7200

B

Ratio of Inventory

40%

40%

C = A x B

Budgeted Ending Inventory

2680

2880

D

Budgeted Unit Sales

5800

6700

E = C+D

Required Units of available production

8480

9580

F

Budgeted Beginning Inventory

2320

2680

G = E - F

Units to be produced

6160

6900

Answer

Production Budget

for 6 month period ended June 30, 2017

Quarter

1

2

Budgeted Sales Units

                5,800

                   6,700

Add: Desired expected ending inventory of finished goods

                2,680

                   2,880

Total needs (requirements)

                8,480

                   9,580

Less: Beginning inventory of finished goods

                2,320

                   2,680

Units required to be produced

                6,160

                   6,900

             13,060

Working

Working

Q1

Q2

Q3

A

Budgeted Production

                    6,160

                     6,900

                7,800

B

Material requirement per unit

                            4

                             4

                        4

C=A x B

Material needed for production

                 24,640

                   27,600

             31,200

D = 25% of next quarter\'s \'C\'

Budgeted Ending Inventory

                    6,900

                     7,800

E = C+D

Total material requirements

                 31,540

                   35,400

F

Beginning Inventory

                    6,160

                     6,900

G = E - F

Material to be purchased

                 25,380

                   28,500

H

Cost of material per pound

$                   5.00

$                    5.00

I = G x H

Total budgeted direct material cost

$      126,900.00

$       142,500.00

Answer

Direct Material Budget

for 6 month period ended June 30, 2017

Quarter

1

2

Budgeted production of units of finished goods

                6,160

                   6,900

Material required per unit

                        4

                           4

Requirement for production

             24,640

                 27,600

Add: Desired expected ending inventory of raw material

                6,900

                   7,800

Total needs (requirements)

             31,540

                 35,400

Less: Beginning Inventory of raw material

                6,160

                   6,900

Raw material to be purchased

             25,380

                 28,500

Cost of raw material per pound

$               5.00

$                  5.00

Total cost of raw material purchased

$ 126,900.00

$     142,500.00

$ 269,400.00

Working		Q1	Q2
A	Next quarter budgeted sales	6700	7200
B	Ratio of Inventory	40%	40%
C = A x B	Budgeted Ending Inventory	2680	2880
D	Budgeted Unit Sales	5800	6700
E = C+D	Required Units of available production	8480	9580
F	Budgeted Beginning Inventory	2320	2680
G = E - F	Units to be produced	6160	6900