Problem 1: Master Budget (20 points total) Omega, Inc. has developed the followi
ID: 2379608 • Letter: P
Question
Problem 1: Master Budget (20 points total)
Omega, Inc. has developed the following sales forecast for the first six months of the coming year
Month
Sales (in units)
January
30,000
February
50,000
March
70,000
April
80,000
May
60,000
June
50,000
The beginning inventory on January 1 is 8,000 units. The desired ending inventory for the coming year is to be 25 percent of next month's sales.
Each unit requires 6 units of material A at $8 per unit and 3 units of material B at $2 per unit. There are 15,000 units of A and 4,500 units of B on hand January 1 and the desired ending inventory for these will be 30 percent of next month's needs for the coming year.
Prepare purchase budgets for materials A and B in units and dollars for the same months.
Month
Sales (in units)
January
30,000
February
50,000
March
70,000
April
80,000
May
60,000
June
50,000
Explanation / Answer
Production Budget Jan Feb Mar Apr A Sale 30000 50000 70000 80000 B Ending Inventory 12500 17500 20000 15000 C Beginning Inventory 8000 12500 17500 20000 D Production [A+B-C] 34500 55000 72500 75000 Purchase Budget of Material A Jan Feb Mar Apr A Production 34500 55000 72500 75000 B Raw Material Required per production Unit 6 6 6 6 C Raw Material Required 207000 330000 435000 450000 D Ending Inventory 99000 130500 135000 103500 E Beginning Inventory 15000 99000 130500 135000 F Purchase Required [C+D-E] 291000 361500 439500 418500 G Cost Per Unit $ 8.00 $ 8.00 $ 8.00 $ 8.00 H Purchase Cost $ 2,328,000.00 $ 2,892,000.00 $ 3,516,000.00 $ 3,348,000.00 Purchase Budget of Material B Jan Feb Mar Apr A Production 34500 55000 72500 75000 B Raw Material Required per production Unit 3 3 3 3 C Raw Material Required 103500 165000 217500 225000 D Ending Inventory 49500 65250 67500 51750 E Beginning Inventory 4500 49500 65250 67500 F Purchase Required [C+D-E] 148500 180750 219750 209250 G Cost Per Unit $ 2.00 $ 2.00 $ 2.00 $ 2.00 H Purchase Cost $ 297,000.00 $ 361,500.00 $ 439,500.00 $ 418,500.00