3. Calculate the ending inventory of drums for December of the prior year, and for January and February. Round your answers to the nearest whole drum.
Ending inventory for December: _________________ drums
Ending inventory for January: _________________ drums
Ending inventory for February: _________________ drums
| 4. Prepare a direct materials purchases budget for drums for the months of January and February. Round Drums per unit to one decimal place. Round Price per drum to the nearest cent. Round Dollar purchases to the nearest dollar. Round all the other values to the nearest whole unit. Do not include a multiplication symbol as part of your answer.
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Cornerstone Exercise 9-24 (Algorithmic)
Preparing a Direct Labor Budget
Patrick Inc. makes industrial solvents. Planned production in units for the first three months of the coming year is:
| January | 40,000 | |||
| February | 55,000 | |||
| March | 60,000 |
Each drum of industrial solvent takes 0.3 direct labor hours. The average wage is $17.10 per hour.
| Prepare a direct labor budget for the months of January, February, and March, as well as the total for the first quarter. Do not include a multiplication symbol as part of your answer.
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Exercise 9-35
Production Budget
Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. Projected sales (number of speakers) for the coming five quarters are as follows:
The vice president of sales believes that the projected sales are realistic and can be achieved by the company.
Stillwater Designs needs a production budget for each product (representing the amount that must be outsourced to manufacturers located in Asia). Beginning inventory of S12L7 for the first quarter of 2012 was 340 boxes. The company’s policy is to have 20 percent of the next quarter’s sales of S12L7 in ending inventory. Beginning inventory of S12L5 was 170 boxes. The company’s policy is to have 30 percent of the next quarter’s sales of S12L5 in ending inventory.
| Prepare a production budget for S12L7 for each quarter for 2012 and for the year in total.
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| Prepare a production budget for S12L5 for each quarter for 2012 and for the year in total.
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Exercise 9-36 (Algorithmic)
Production Budget and Direct Materials Purchases Budgets
Smee Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The sales budget for the first four months of the year is as follows:
| Unit Sales | Dollar Sales ($) | |
| January | 60,000 | $114,000 |
| February | 70,000 | 133,000 |
| March | 80,000 | 152,000 |
| April | 50,000 | 95,000 |
Company policy requires that ending inventories for each month be 10 percent of next month’s sales. At the beginning of January, the inventory of peanut butter is 35,000 jars.
Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy requires that ending inventories of raw materials for each month be 20 percent of the next month’s production needs. That policy was met on January 1.
| 1. Prepare a production budget for the first quarter of the year. Show the number of jars that should be produced each month as well as for the quarter in total.
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| 2a. Prepare a direct materials purchases budget for jars for the months of January and February. Do not include a multiplication symbol as part of your answer.
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| 2b. Prepare a direct materials purchases budget for peanuts for the months of January and February. Do not include a multiplication symbol as part of your answer.
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Exercise 9-37
Production Budget
Pumpro Inc. produces submersible water pumps for ponds and cisterns. The unit sales for selected months of the year are as follows:
Company policy requires that ending inventories for each month be 30 percent of next month’s sales. However, at the beginning of April, due to greater sales in March than anticipated, the beginning inventory of water pumps is only 40,000.
| Prepare a production budget for the second quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.
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Exercise 9-38
Direct Materials Purchases Budget
You may use the attached spreadsheet to help you complete this activity, but you are not required to do so. You will find the spreadsheet by clicking on the link in the drop-down menu above.
Fang Company produces decorative plastic items, including hollow plastic pumpkins often used by trick-or-treaters for Halloween. Each pumpkin requires about 5 ounces of plastic costing $0.08 per ounce. Fang molds the plastic into a pumpkin shape and applies decoration to the outside of each pumpkin. Fang has budgeted production of the pumpkins for the next four months as follows:
Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 20 percent of the following month’s production needs. The inventory of plastic at the beginning of July equals exactly the amount needed to satisfy the inventory policy.
| Prepare a direct materials purchases budget for July, August, and September, showing purchases in units and in dollars for each month and in total.
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Exercise 9-34
Sales Budget
Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7 sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five quarters are as follows:
The vice president of sales believes that the projected sales are realistic and can be achieved by the company.
| 1. Prepare a sales budget for each quarter of 2012 and for the year in total. Show sales by product and in total for each time period. Do not include a multiplication symbol as part of your answer.
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2. How will Stillwater Designs use this sales budget?
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
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