Tonga Toys manufactures and distributes a number of products to retailers. One o
ID: 2461174 • Letter: T
Question
Tonga Toys manufactures and distributes a number of products to retailers. One of these products, Playday, requires three pounds of material A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter-July, August, and September. Peak sales of Playclay occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory requirements: The finished goods inventory on hand at the end of each month must be equal to 5,000 units plus 30% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 17,000 units. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 for material A135 is budgeted to be 64,500 pounds. The company maintains no work in process inventories. A sales budget for Playclay for the last six months of the year follows. Prepare a production budget for Playday for the months July, August, September, and October. (Input all amounts as positive values. Do not round intermediate calculations.) Prepare a direct materials budget showing the quantity of material A135 to be purchased for July, August, and September and for the quarter in total. (Input all amounts as positive values. Do not round intermediate calculations.)Explanation / Answer
Tonga Toys
Sales Budget
Particulars
Jul
Aug
Sep
Oct
Nov
Dec
Sales
40,000
50,000
70,000
35,000
20,000
10,000
Tonga Toys
Production Budget
Particulars
Jul
Aug
Sep
Oct
Nov
Dec
Sales
40,000
50,000
70,000
35,000
20,000
10,000
Less desired Beg inventory
(17,000)
(20,000)
(26,000)
(15,500)
(11,000)
(8,000)
Plus Ending desired inventory
20,000
26,000
15,500
11,000
8,000
5,000
Total
43,000
56,000
59,500
30,500
17,000
7,000
Tonga Toys
Direct Material Purchase Budget
Particulars
Jul
Aug
Sep
Oct
Third Quarter
Material Requirement
129,000
168,000
178,500
91,500
567,000
Less desired Beg inventory
(64,500)
(84,000)
(89,250)
(45,750)
(283,500)
Plus desired Ending inventory
84,000
89,250
45,750
283,500
502,500
Total
148,500
173,250
135,000
329,250
786,000
Tonga Toys
Sales Budget
Particulars
Jul
Aug
Sep
Oct
Nov
Dec
Sales
40,000
50,000
70,000
35,000
20,000
10,000