chapter 20 quiz - Oak Creek Company is preparing its master...

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Unformatted text preview: Oak Creek Company is preparing its master budget for 2010. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Sales: Sales forthe yearare expected to total 1,000,000 units. Quarterly sales are 20%, 25%, 25%, and 30% respectively. The sales price is expected to be $40 per unit for the first three quarters and $45 per unit beginning in the fourth quarter. Sales in the first quarter of2011 are expected to be 10% higher than the budgeted sales for the first quarter of 2010. Production: Management desires to maintain the ending finished goods inventories at 20% of the next quarter's budgeted sales volume. Direct materials: Each unit requires 2 pounds of raw materials at a cost of $10 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter's production requirements. Assume the production requirements for first quarter of 2011 are 500,000 pounds. Drnnann tho calm: nmriilri'inn :imi riirnri' m:hnri:le hlirinni'c hu nllari'nr: Fnr 7010 OAK CREEK COMPANY Production Budget For the Year Ending December 31, 2010 Quarter 1 2 3 4 Year Expected unit sales 200000 250000 250000 300000 Add: Desired ending finished goods units 50000 50000 60000 44000 Total required units 250000 300000 310000 344000 Less: Beginning finished goods units 40000 50000 50000 60000 Required production units 210000 250000 260000 284000 1004000 OAK CREEK COMPANY Direct Materials Budget For the Year Ending December 31, 2010 Quarter 1 2 3 4 Year Units to be produced 210000 250000 260000 284000 Direct materials per unit 2 2 2 2 Total pounds needed for production 420000 500000 520000 568000 Add: Desired ending direct materials 50000 52000 56800 50000 Total materials required 470000 552000 526800 618000 Less: Beginning direct materials 42000 50000 52000 56800 Direct materials purchases 428000 502000 524800 561200 Cost per pound 10 10 10 10 Total cost of direct materials purchases $ 4280000 $ 5020000 is 5248000 $ 5612000 $ 20160000 OAK CREEK COMPANY Production Budget For the Year Ending December 31, 2010 Quarter 1 2 3 4 Year Expected unit sales 200,000 250,000 250,000 300,000 Add: Desired ending finished goods units 50,000 50,000 60,000 3“14,000 Total required units 250,000 300,000 310,000 344,000 Less: Beginning finished goods units **40,000 50,000 50,000 60,000 Required production units 210,000 250,000 260,000 234,000 954,000 =*Estimated first-quarter 2011 sales volume 200,000 + {200,000 X 10%} = 220,000: 220,000 x 20%. =““2002: of estimated first-quarter 2010 sales units [200,000 X 20%). OAK CREEK COMPANY Direct Materials Budget For the Year Ending December 31, 2010 Quarter 1 2 3 4 Year Unit: to be produced 210,000 250,000 260,000 284,000 Direct materials per unit X 2 X 2 X 2 K 2 Total pounds needed for production 420,000 500,000 520,000 568,000 Add: Desired ending direct materials 40,000 52,000 56,800 50,000’“ Total materials required 460,000 552,000 5?6,800 618,000 Less: Beginning direct materials (pounds) 42,000* * 40,000 52,000 56,800 Direct materials purchases 418,000 512,000 524,800 561,200 Cost per pound X 10 X 10 X 10 X 10 Total cost of direct materials purchases $4,180,000 $5,120,000 $5,248,000 $5,612,000 $20,160,000 =‘Estimated first-quarter 2011 production requirements 500,000 X 10% = 50,000 ="“10‘11'6 of estimated first-quarter pounds needed for production ...
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