Ingles Corporation is a manufacturer of tables. The table tops are manufactured
ID: 2538656 • Letter: I
Question
Ingles Corporation is a manufacturer of tables. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next month’s sales are in the current month’s finished goods inventory. Ingles also purchases sufficient materials to ensure that the current month’s ending materials inventory is 60 percent of the following month’s direct materials required for production. Ingle’s sales budget in units for the next quarter is as follows: July 2,450 August 2,900 September 2,100 Ingle’s ending inventories in units for July 31 are as follows: Finished goods 1,900 Materials (legs) 4,000
Requirements: 1. Prepare Ingle’s production budget for tables in August. 2. Prepare Ingle’s August direct materials purchases budget for table legs. 3. How many employees will be required for the Assembly Department in August? Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.
Explanation / Answer
Solution:
Part 1 – Production Budget for August Month
Production Budget
AUGUST
Budgeted Units to be sold
2900
Plus: Desired Units in ending inventory
(Sept Units Sold 2100 * 40%)
840
Total units needed
3740
Less: Units in beginning inventory (July Ending Inventory)
1900
Budgeted units to be produced
1840
Part 2 --- Sufficient information is not available to calculate the Direct materials purchase budget... since October Sales Units are not available in the question from where we can calculate the SEpt months production unit.
Part 3 --- How many employees will be required for the Assembly Dept in AUgust
August budgeted units to be produced = 1840 Units
Required labor hours to assemble a table = 16/60 hours
Total Hours required to produced the units of August = 1840 Units x 16 / 60 = 490.67 hours
Number of Available Hours in a month (1 Person) = 40 hour week x 4 week month = 160 Hours
Number of Employees Required = Total HOurs Needed 490.67 hours / Available hours in a month 160 = 3.067 Employees
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Production Budget
AUGUST
Budgeted Units to be sold
2900
Plus: Desired Units in ending inventory
(Sept Units Sold 2100 * 40%)
840
Total units needed
3740
Less: Units in beginning inventory (July Ending Inventory)
1900
Budgeted units to be produced
1840