7 23 the production budget sales sales budget budget

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Unformatted text preview: s Budget Budget and ted e pl Expected om C Cash Collections Production Budget The production budget must be adequate to The meet budgeted sales and to provide for the desired ending inventory. the 7-24 The Production Budget • The management at Royal Company wants The ending inventory to be equal to 20% of the 20% following month’s budgeted sales in units. following • On March 31st, 4,000 units were on hand. Let’s prepare the production budget. Let’s 7-25 The Production Budget 7-26 The Production Budget March 31 ending inventory. Budgeted May sales Desired ending inventory % Desired ending inventory 50,000 20% 10,000 7-27 Quick Check What is the required production for May? a. 56,000 units b. 46,000 units c. 62,000 units d. 52,000 units 7-28 Quick Check What is the required production for May? a. 56,000 units b. 46,000 units c. 62,000 units d. 52,000 units 7-29 The Production Budget 7-30 The Production Budget Assumed ending inventory. 7-31 Learning Objective 4 Prepare a direct materials budget, including a schedule of expected cash disbursements for purchases of materials. 7-32 The Direct Materials Budget • At Royal Company, five pounds of material are At five required per unit of product. required • Management wants materials on hand at the Management end of each month equal to 10% of the 10% following month’s production. following • On March 31, 13,000 pounds of material are On on hand. Material cost is $0.40 per pound. $0.40 per Let’s prepare the direct materials budget. Let’s 7-33 The Direct Materials Budget From production budget. From production budget. 7-34 The Direct Materials Budget 7-35 The Direct Materials Budget March 31 inventory. 10% of following month’s production needs. Calculate the materials to be purchased in May. 7-36 Quick Check How much materials should be purchased in How much May? May? a.. 221,500 pounds a b. 240,000 pounds b. 240,000 pounds c. 230,000 pounds c. d. 211,...
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