Question : Ex. 171 Butler Manufacturing manufactures two products, (1) Regular and (2) : 1311843

Ex. 171

Butler Manufacturing manufactures two products, (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows:

Units of Product

2013Regular Deluxe  Total

July10,00015,00025,000

August6,00010,00016,000

September9,00014,00023,000

October8,00012,00020,000

It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company’s policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month’s production needs for the Regular product and 20% of the next month’s production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 6,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is $5 Regular and $8 Deluxe.

Instructions

Prepare separate direct materials budgets for each product for the third quarter of 2013.

Ex. 171  (Cont.)

BUTLER MANUFACTURING

Direct Materials Budget—Deluxe

For the Quarter Ended September 30, 2013

July                                    August    September    Total

Units to be produced15,00010,00014,000

Direct materials per unit       ×    5      ×    5      ×    5

Total pounds needed for production75,00050,00070,000

Add: Desired ending direct materials (pounds)    10,000   14,000    12,000*

Total materials required85,00064,00082,000

Less: Beginning direct materials (pounds)    15,000    10,000                 14,000

Direct materials purchases70,00054,00068,000

Cost per pound      ×   $8      ×  $8      ×   $8

Total cost of direct materials purchases$560,000$432,000$544,000$1,536,000

*20% × (12,000 × 5)

Ex. 172

Garver Industries has budgeted the following unit sales:

2013          Units

January10,000

February8,000

March9,000

April11,000

May15,000

The finished goods units on hand on December 31, 2012, was 2,000 units. Each unit requires 3 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company’s policy to maintain a finished goods inventory at the end of each month equal to 20% of next month’s anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 30% of the pounds needed for the following month’s production. There were 8,640 pounds of raw materials on hand at December 31, 2012.

Instructions

For the first quarter of 2013, prepare (1) a production budget and (2) a direct materials budget.

Ex. 172  (Cont.)

(2)GARVER INDUSTRIES

Direct Materials Budget

For the Quarter Ended March 31, 2013

January                                February  March       Total

Units to be produced9,6008,2009,400

Direct materials per unit      ×   3      ×   3      ×   3

Total pounds needed for production28,80024,60028,200

Desired ending direct materials (pounds)    7,380    8,460    10,620**

Total materials required36,18033,06038,820

Less: Beginning direct materials (pounds)    8,640    7,380    8,460

Direct materials purchases27,54025,68030,360

Cost per pound    ×   $4    ×   $4    ×   $4

Total cost of direct materials purchases$110,160$102,720$121,440$334,320

**April units: 11,800 × 3 = 35,400 × 30%.