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    Calculating a Production, Direct Materials and Static Budget

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    3. Palermo Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2; 15,000 in quarter 3; and 18,000 in quarter 4.

    Management desires to have an ending finish goods inventory equal to 25% of th enext quarter's expected unit sales. Prepare a production budget by quarters for the first 6 months of 2014.

    4. Perine Company has 2,000 pounds of raw materials in its December 31, 2013, ending inventory. Required production for January and February of 2014 are 4,000 and 5,000 units, respectively. Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6. Management desires an ending inventory equal to 25% of next month's materials requirements. Prepare the direct materials budget for January.

    6. For the quarter ended March 31, 2014, Maris Company accumulates the following sales data for its product, Garden-Tools: $310,000 budget; $305,000 actual.

    In the second quarter, budgeted sales were $380,000, and actual sales were $384,000. Prepare a static budget report for the second quarter and for the year to date.

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    Solution Preview

    3. A production budget for a company lists how many units will be produced in a given time frame using forecasts of future sales. In this example, the author is asking for a budget of how many units need to be produced each quarter given the forecasted level of sales.

    For this question it would probably be helpful to think about this question in table format:

    Quarter Unit Sales Estimate 25% of Next Quarter's expected sales
    1 10,000 (given) 3,000 (12,000 x ...

    Solution Summary

    Calculating a Production, Direct Materials and Static Budget when given projected sales and inventory levels.