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ACCT 002 Lecture Notes - Lecture 13: Finished Good, Budget

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School
College of The Sequoias
Department
Accounting (ACCT)
Course
ACCT 002
Professor
teller

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Document Summary

Used for retail firms instead of a production budget. Details how many units must be purchased to meet sales needs and to satisfy ending inventory requirements. Firms must plan for both expected unit sales and desired inventory levels. Units to be purchased = expected unit sales + units in desired ending inv - units in beginning inventory. Tells the amount and cost of raw materials to be purchased in each time period. Formula (dm needed for production + dm in desired ending inv - dm in beg inv = dm to be purchased) The direct labour budget shows the total direct labour hours and the direct labour cost needed for the number of units in production budget. As with dm, the budgeted hours of direct labour are determined by the relationship between labour and output. The overhead budget shows the expected cost of all production costs other than dm and.

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Related Questions

On the direct materials​ budget, the total quantity of direct materials to purchase is computed as

a. quantity needed for production + desired end inventory of DM - beginning inventory of DM.

b. units to be produced + desired end inventory of DM - beginning inventory of DM.

c. units to be produced - desired end inventory of DM + beginning inventory of DM.

d. quantity needed for production - desired end inventory of DM + beginning inventory DM.

White Corporation's budget calls for the following sales for next year:

Quarter 1 96,500 units Quarter 2 82,000 units Quarter 3 67,700 units Quarter 4 98,800

Each unit of the product requires 3 pounds of direct materials. The company's policy is to begin each quarter with an inventory of product equal to 5% of that quater's estimated sales requirements and an inventory of direct materials equal to 20% of that quarter's estimated direct materials requirements for production.

1. Determine the production budget for the second quarter:

Budgeted sales_____________

Desired ending inventory________________

Total units needed ___________________

Beginning inventory ____________________

Total units to produce__________________

2. Determine the materials purchases budget for the second quater:

Budgeted production _________________

Direct materials (lbs.) per unit produced ____________________

Direct materials needed in production

Desired ending inventory of direct materials (lbs.)_____________

Total direct materials needed ________________________

Beginning inventory of direct materials ___________________

Budgeted purchases of direct materials (lbs.) _______________

PLEASE SHOW WORK

On January 1, 2014, the Hardin Company budget committee hasreached agreement on the following data for the 6 months endingJune 30, 2014.

Sales units: First quarter 5,000; second quarter 6,000; third quarter7,000
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: 7,200 units


The ending raw materials and finished goods inventories at December31, 2013, follow the same percentage relationships to productionand sales that occur in 2014. 3 pounds of raw materials arerequired to make each unit of finished goods. Raw materialspurchased are expected to cost $4 per pound.

1quarter 2quarter

Expected Unit Sales: ___________________________________________

Add Desired Ending Finished GoodsUnit:____________________ _______________________

Total Required Units: ___________________________________________

Less Begining Finished Goods Unit: ___________________________________________

Required Production Units: ___________________________________________

Prepare a direct materials budget by quarters for the 6-monthperiod ended June 30, 2014.

Units to be Produced: ___________________________________________

Direct Materials per unit: ___________________________________________

Total Pounds Needed for Production: ___________________________________________

Add: Desired Ending Direct Materials____________________ _______________________

Total Materials Required: ___________________________________________

Less Beginning Direct Materials: ___________________________________________

Direct Materials Purchases: ___________________________________________

Cost Per Pound: ___________________________________________

Total Cost of Direct Materials Purchases:____________________ _______________________