Question

Cacophony Electronics produces wireless speakers for outdoor us. Their most popular model is the Extreme and requires four separate EX13 components per unit. Sales of the Extreme are the highest in the second quarter of each year. The company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 16,000 units plus 10% of the next month’s sales. The finished goods inventory on March 31 is budgeted to be 28,000 units. b. The raw materials inventory on hand at the end of each month must be equal to 20% of the following month’s production needs for raw materials. The raw materials inventory on March 31 for EX13 is budgeted to be 98,400 components. c. The company maintains no work in process inventories. A sales budget for the Extreme speaker in units is as follows: April 120,000 May 150,000 June 210,000 July 106,000 August 60,000 Required: 1. Prepare a production budget for the Extreme for April, May, June and July. 2. Prepare a direct materials purchases budget showing the quantity of EX13 components to be purchased for April, May and June and for the quarter in total.

          Cacophony Electronics produces wireless speakers for outdoor us. Their most popular model is the Extreme and requires four separate EX13 components per unit. Sales of the Extreme are the highest in the second quarter of each year. The company has the following inventory requirements:
a.    The finished goods inventory on hand at the end of each month must be equal to 16,000 units plus 10% of the next month’s sales. The finished goods inventory on March 31 is budgeted to be 28,000 units.
b.    The raw materials inventory on hand at the end of each month must be equal to 20% of the following month’s production needs for raw materials. The raw materials inventory on March 31 for EX13 is budgeted to be 98,400 components.
c.     The company maintains no work in process inventories.
A sales budget for the Extreme speaker in units is as follows:
April 120,000
May 150,000
June 210,000
July   106,000
August 60,000
Required:
1.    Prepare a production budget for the Extreme for April, May, June and July.
2.    Prepare a direct materials purchases budget showing the quantity of EX13 components to be purchased for April, May and June and for the quarter in total.

Show more…

Added by Felipe P.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Madhur L

11/11/2023

Step 1

Sure! Let's break down the requirements step by step. Show more…

Show all steps

lock

Thanks for your feedback!

Cacophony Electronics produces wireless speakers for outdoor us. Their most popular model is the Extreme and requires four separate EX13 components per unit. Sales of the Extreme are the highest in the second quarter of each year. The company has the following inventory requirements: a. The finished goods inventory on hand at the end of each month must be equal to 16,000 units plus 10% of the next month’s sales. The finished goods inventory on March 31 is budgeted to be 28,000 units. b. The raw materials inventory on hand at the end of each month must be equal to 20% of the following month’s production needs for raw materials. The raw materials inventory on March 31 for EX13 is budgeted to be 98,400 components. c. The company maintains no work in process inventories. A sales budget for the Extreme speaker in units is as follows: April 120,000 May 150,000 June 210,000 July 106,000 August 60,000 Required: 1. Prepare a production budget for the Extreme for April, May, June and July. 2. Prepare a direct materials purchases budget showing the quantity of EX13 components to be purchased for April, May and June and for the quarter in total.

Play audio

Feedback

Powered by NumerAI

Madhur L and 61 other subject Principles of Accounting educators are ready to help you.

Ask a new question

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Recommended Videos

Recommended Textbooks

Transcript

00:01 Hello students, here is a question.

00:02 Pick sound a merchandise company, specialize in a home computer speakers, budget is not monthly cost of goods sold to equal to 70 % of sale.

00:11 Its inventory policy calls from ending inventory at the end of each month equals to 20 % of a next month.

00:18 Budgeted cost of a goods sold are all purchases on a credit is 25 % purchases in a month paid for the same month another 60%.

00:27 So here we have some questions like budget merchandise purchase for july, august, september and october budgeted payments on account payable for september and october and budget ending balance for october payable.

00:40 So here is some hints are also given to reference some guidance.

00:44 So based on the information provided in the question, let us discuss the answer for this.

00:49 So first we need to calculate the budgeted cost of goods sold.

00:55 To calculate this, we use a cost of goods sold of 70 % sale.

00:59 So we calculate as 350 ,000 into 7 0 .7, which is equal to 245 ,000.

01:11 This is for the month july and for the month of october.

01:14 For august, it is 290 ,000 into 0 .7, which is equal to 203 ,000.

01:24 And for september, it is 320 ,000 into 0 .7, which gives us 224 ,000.

01:33 And for the month of october, it is 275 ,000 into 0 .7, which gives us 192 ,500.

01:42 So next we need to calculate the ending inventory of each month.

01:51 So again, we calculate the ending inventory for all the months, which is the first month will be july.

02:02 So july it is 203 ,000 into 0 .2, which gives us 40 ,600.

02:10 And for august, it is 224 ,000 into 0 .2, which gives us 44 ,800.

02:18 And for september, it is 192 ,500 into 0 .2, which gives us 38 ,500.

02:28 So next will be calculation of budgeted merchandise.

02:34 Calculation of merchandise purchases.

02:45 So to calculate the merchandise, we also use the use the formula that cost of goods sold plus ending inventory minus beginning inventory.

02:54 So again, we calculate for the all months.

02:57 So we calculate budgeted cost goods is equal to budgeted cost of goods sold plus ending inventory minus beginning inventory.

03:29 So first we will calculate for july...

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later