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%.
