The marketing department of Gaeber Industries has submitted the following sales forecast for the...

Question

The marketing department of Gaeber Industries has submitted the following sales forecast for the upcoming fiscal year:

The company expects to start due the first quarter with 1,600 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 20% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1.700 units. In addition, the beginning raw materials inventory for the first quarter is to be 3,120 pounds and the beginning accounts payable for the first quarter is budgeted to be $14,820.
Each unit requires 2 pounds of raw material that costs $4.00 per pound. Management desires to end each quarter with an inventory of raw materials equals to 20% of the following quarter’s production needs. The desired ending inventory for the fourth quarter is 3,140 pounds. Management plans to pay for 75% of raw materials purchases in the quarter acquired and 25% in the following quarter.
Required:
1.Prepare the company’s production budget for the upcoming fiscal year.
2.Prepare the company’s direct materials budget and schedule of expected cash disbursements for the purchases of materials for the upcoming fiscalyear.

David · Accepted Answer

a) Gaeber Industries production budget
 1St Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 
Budgeted 
Unit sales 
8000 7000 6000 70000 280000 
Add desired 
ending 
inventory 
1400 1200 1400 1700 1700 
Total units 
needed 
9400 8200 7400 8700 29700 
Less 
beginning 
inventory 
1600 1400 1200 1400 1600 
Required 
production 
7800 6800 6200 7300 28100
b) Direct Materials Budget
 1St 
Quarter 
2nd 
Quarter 
3rd Quarter 4th Quarter Year 
Required Production 7800 6800 6200 7300 28100 
Raw materials per 
unit 
X 2 X 2 X 2 X 2 X 2 
Production needs 15600 13600 12400 14600 56200 
Add desired ending 
inventory 
2720 2480 2920 3140 3140 
Total needs 18320 16080 15320 17740 59340 
Less beginning 
inventory 
3120 2720 2480 2920 3120 
Raw materials to be 
purchased 
15200 13360 12840 14820 56220 
Cost of raw materials 
to be purchased at 
$4.00 per pound 
$60800 $53400 $51360 $59280 $224880
Schedule of expected cash disbursements for materials
 1St Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 
Accounts 
payable, 
beginning 
balance 
14820    14820 
1st Quarter 45600 15200   60800 
2nd Quarter  40080 13360  53400 
3rd  Quarter 
purchase 
  38520 12840 51360 
4th  Quarter 
purchase 
   44460 44460 
Total cash 
disbursements 
for materials 
$60420 $55280 $51880 $57300 $224880

The marketing department of Gaeber Industries has submitted the following sales forecast for the upcoming fiscal year: The company expects to start due the first quarter with 1,600 units in finished...

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