On January 1, 2014, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2014.
| Sales units: | First quarter 5,900; second quarter 6,100; third quarter 7,900 | |
| Ending raw materials inventory: | 40% of the next quarter’s production requirements | |
| Ending finished goods inventory: | 25% of the next quarter’s expected sales units | |
| Third-quarter production: | 7,840 units |
The ending raw materials and finished goods inventories at December 31, 2013, follow the same percentage relationships to production and sales that occur in 2014. 5 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $5 per pound
Prepare a production budget by quarters for the 6-month period ended June 30, 2014
Answer:
production budget by quarters for the 6-month period ended June 30, 2014.
| Quarter 1 | Quarter 2 | Six Months |
|
| Sales | 5900 | 6100 | |
| Add: | |||
| 30% of next Quarter closing | 1525 | 1975 | |
| Less: | |||
| 30% of current Quarter as opeaning | 1475 | 1525 | |
| Production required | 5950 | 6550 | 12500 |
Working notes for the above answer:
30% of next Quarter closing
1
= 6100 x 25%
=1525
2
7900 x 25%
=1975
30% of current Quarter as opeaning
1
5900x 25%
=1475
2
= 6100 x 25%
=1525
