On January 1, 2017, the Hardin Company budget committee has reached agreement on

Question

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017.

The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.

Sales units: First quarter 5,800; second quarter 6,600; third quarter 7,600 Ending raw materials inventory: 40% of the next quarter’s production requirements Ending finished goods inventory: 25% of the next quarter’s expected sales units Third-quarter production: 7,780 units. Prepare a production budget by quarters for the 6-month period ended June 30, 2017. HARDIN COMPANY Production Budget Quarter 2 Year

Explanation / Answer

Production budget :

Quarter 1 Quarter 2 Year Sales units 5800 6600 Add: Desired ending inventory 1650 1900 Total needs 7450 8500 Less: Beginning inventory -1450 -1650 Production units 6000 6850 12850

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