Pargo Company is preparing its master budget for 2017. Relevant data pertaining
ID: 2476200 • Letter: P
Question
Pargo Company is preparing its master budget for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.
Sales. Sales for the year are expected to total 1,000,000 units. Quarterly sales are 19%, 26%, 27%, and 28%, respectively. The sales price is expected to be $41 per unit for the first three quarters and $46 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be 10% higher than the budgeted sales for the first quarter of 2017.
Production. Management desires to maintain the ending finished goods inventories at 20% of the next quarter’s budgeted sales volume.
Direct materials. Each unit requires 2 pounds of raw materials at a cost of $11 per pound. Management desires to maintain raw materials inventories at 10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are 501,000 pounds.
Prepare the sales, production, and direct materials budgets by quarters for 2017.
I originally did a lot of the problem but other tutor did not really comment enough/had no idea what he was talking about so I need someone to use tables, etc.
Explanation / Answer
Sales Budget Particulars Qtr1 Qtr2 Qtr3 Qtr4 2018 Qtr 1 Sales In units 190000 260000 270000 280000 209000 Selling price per unit 41 41 41 46 Total Sales revenues 7790000 10660000 11070000 12880000 Production BUDGET Particulars Qtr1 Qtr2 Qtr3 Qtr4 2018 Qtr 1 Units Sales 190000 260000 270000 280000 209000 Add: Targeted Ending Finished Inventory 52000 54000 56000 41800 Total Required Units 242000 314000 326000 321800 Less: Beginning Finished Invenotry 0 52000 54000 56000 Units to be produced 242000 262000 272000 265800 DIRECT MATERIAL USAGE BUDGET IN QUANTITY AND DOLLARS Particulars Qtr1 Qtr2 Qtr3 Qtr4 2018 Qtr 1 Material Required ( 2 x units to be produced) 484000 524000 544000 531600 501000 Add: targeted ending Material Inventory 52400 54400 53160 50100 Total Material Required for Production (Pounds) 536400 578400 597160 581700 cost per pound 11 11 11 11 Total Material Required for Production (dollars) 5900400 6362400 6568760 6398700