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Production Budget / Material Purchase Budget

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Production budget

On January 1, 2009 the Batista Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2009.
Sales units: First quarter 5,300; second quarter 6,300; third quarter 7,500
Ending raw materials inventory: 50% of the next quarter's production requirements
Ending finished goods inventory: 30% of the next quarter's expected sales units
Third-quarter production: 7,800 units
The ending raw materials and finished goods inventories at December 31, 2008, follow the same percentage relationships to production and sales that occur in 2009. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.
Prepare a production budget by quarters for the 6-month period ended June 30, 2009.
BATISTA COMPANY
Production Budget
For the Six Months Ending June 30, 2009
Quarter Six
1 2 Months

Add:
Total required units
Less:
Required production units

Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2009.
BATISTA COMPANY
Direct Materials Budget
For the Six Months Ending June 30, 2009
Quarter Six
1 2 Months

Direct materials per unit × ×
Total pounds needed for production
Add:
Total materials required
Less:
Direct materials purchases
× $ × $
Total cost of direct materials purchases $ $ $

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The solution explains how to prepare a production budget and a direct material purchases budget.

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