ABC Inc has compiled the following data in order to put toge

ABC Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:

January

February

March

April

Sales (units)

            50,000

            55,000

            40,000

            30,000

Additional information:

ABC sells each unit for $200.

Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met in December.

Company policy is to have 25% of next month’s production needs in ending raw materials inventory. The production needs for April is 120,000. This policy was met in December.

It takes four pounds of material to produce each unit and the cost is $5.00/pound.

Required:

1. Prepare a sales budget for the January, February and March and for the first quarter in total.

2. Prepare a production budget for January, February and March and for the first quarter in total.

3. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.

	January	February	March	April
Sales (units)	50,000	55,000	40,000	30,000

Solution

Sales Budget January February March Total Sales (units) 50000 55000 40000 145000 Sales Price Per Unit 200 200 200 Total Sales $          10,000,000.00 $          11,000,000.00 $            8,000,000.00 $ 29,000,000.00 Production Budget January February March Total Sales 50000 55000 40000 145000 Add desired Ending Finshed goods 30% next month’s sales 16500 12000 9000 9000 Total Need 66500 67000 49000 154000 Less Beginning Inventory 15000 16500 12000 15000 Production Required 51500 50500 37000 139000 Production Budget January February March Total Sales 50000 55000 40000 145000 Add desired Ending Finshed goods 30% next month’s sales 16500 12000 9000 9000 Total Need 66500 67000 49000 154000 Less Beginning Inventory 15000 16500 12000 15000 Production Required 51500 50500 37000 139000 Purchase budget January February March Total Production Required 51500 50500 37000 139000 Meterial Per unit 4 4 4 Total material Needed for Prodution 206000 202000 148000 556000 Add desired Ending Inventory 25% of next month’s production needs 50500 37000 30000 30000 Less Beginning Direct Material 51500 50500 37000 51500 Direct Material to be Purchased 205000 188500 141000 534500 Cost per Pound $                             5.00 $                             5.00 $                             5.00 Total Purchase cost $            1,025,000.00 $                942,500.00 $                705,000.00 $    2,672,500.00