Safe’ n’ Bright, inc., produces outside doors forinstallation on homes. The foll
ID: 2433581 • Letter: S
Question
Safe’ n’ Bright, inc., produces outside doors forinstallation on homes. The following information was gathered toprepare budgets for the upcoming year beginning January 1:
Sales forecast inunits………………………………………………………5,500doors
Finished goods inventory, Jan.1……………………………………………620doors
Target finished goods inventory, Dec.31…………………………………480doors
Raw materials inventory—steel, Jan1……………………………………40,000pounds
Target inventory—steel, Dec.31…………………………………………80,000pounds
Raw materials inventory—glass, Jan.1…………………………………6,000square feet
Target inventory—glass, Dec.31………………………………………4,000square feet
Budgeted purchaseprice—steel…………………………………………$4per pound
Budgeted purchaseprice—glass………………………………………$2per square foot
The manufacture of each door requires 20 pounds of steel and 6square feet of glass.
Explanation / Answer
Prepare the production schedule in units for safe‘n’ Bright.=============================================
Production Shedule (units) ==================== Salesforecast 5,500doors Add: Target finish inventory Dec.31 480doors Total unitsrequired 5,980 doors Less; Finished good Inventory, Jan1 620doors RequiredProduction 5,360 doors Using the production schedule, develop the directmaterials purchase budgets for steel and glass. ======================================================================= Steel Glass Each doorrequires 20pounds 6square feet Materialsrequired 20x5360 6x 5360 107,200pounds 32,160square feet Add: Target Inventory Dec.31 80,000pounds 4,000square feet Total materialsrequired 187,200 pounds 36,160square feet Less : Inventory on Jan1 40,000pounds 6,000square feet Materials to bepurchased 147,200pounds 30,160square feet Materials cost perunit $4 $2 Total cost of materialspurchased $588,800 $60,320 Why might safe ‘n’ Blight’s targetlevel of steel inventory be higher than last year’s endingbalance and its
target level of glass inventory be lower than last year’sending balance? ================================================================================ 1) There might be a change in design requiring moresteel materials and less glass materials 2) There migh be anticipated a prise rise in the procurementprice of steel materials and glass materials remain at the sameprice. 3) new entrants of glass manufacturer into the market offeringcompetitive price and delivery schedule.