Answer: & Explanation:
Production Budget q2
- Q2
sales 67,000
ending policy 4,050 (5% of Q3)
Beginning 3,350 (5% of current quarter)
Production 67,700 (sales + ending - beginning)
Raw materials Budget q2
Production Needs 338,500 (Units x 5)
ending policy 81,850 (20% of production q3)
Beginning 67,700 (20% of q2 production needs)
Purchase 352,650 (needs + desired ending - beginning)
1. The production budget for the second quarter is 41,130.
2. The materials purchases budget for the second quarter is 233,850.
1. Production budget for the second quarter.
WHITE CORPORATION Production Budget for 2nd Quarter
Budgeted sales 81,000
Desired ending inventory 3,350
( 67,000×5%)
Total units needed 84,350
(81,000+3,350)
Beginning inventory (4,050)
(81,000×5%)
Total units to produce 80,300
(84,350-4,050)
2. Materials purchases budget for the second quarter.
First step is to calculate the Desired ending inventory of direct materials (Ibs):
Budgeted sales 67,000
Desired ending inventory 4,900
( 98,000×5%)
Total units needed 71,900
(67,000+4,900)
Beginning inventory (3,350)
(67,000×5%)
Total units to produce 68,550
(71,900-3,350)
Direct materials (Ibs) per unit produced 3
Direct material needed in production 205,650
(68,550×3)
Desired ending inventory of direct materials (Ibs) for 2nd Quarter 41,130
(205,650×20%)
Second step is to calculate the materials purchases budget for the second quarter
WHITE CORPORATION Budgeted Purchases of Direct Materials (In Ibs) 2nd Quarter
Budgeted production 80,300
Direct materials (Ibs) per unit produced 3
Direct material needed in production 240,900
(80,300×3)
Desired ending inventory of direct materials (Ibs) 41,130
Total direct material needed 282,030
(240,900+41,130)
Beginning inventory of direct materials (48,180)
(240,900×20%)
Budgeted purchases of direct materials (Ibs) 233,850
(282,030-48,180)
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