Anderson Boxes makes cardboard boxes. For March and April, Anderson expects to p
ID: 2561045 • Letter: A
Question
Anderson Boxes makes cardboard boxes. For March and April, Anderson expects to produce 12,000 and 15,800 boxes respectively.
The primary material input for the boxes is cardboard. To make one box, Anderson budgets to use 12 linear feet of 2-foot wide cardboard at a cost of $0.75 per linear foot. Anderson expects to start March with 50,000 linear feet of 2-foor-wide cardboard, its direct materials policy is have 40% of the next month’s total inventory needs in ending inventory.
2-1. Prepare the cardboard purchases budget for March.
2-2. Prepare cardboard usage budget for March. Assume that the beginning inventory of cardboard is valued at $.75 per linear foot and that Anderson uses FIFO inventory cost flow.
2-3. Suppose that Anderson values the beginning inventory of cardboard at $0.70 per linear foot, but still expects to pay $0.75 per linear foot for March purchases. Assuming that Anderson uses a FIFO cost flow assumption, what is Anderson’s cardboard usage budget for March?
Explanation / Answer
1 Card Board Purchases Budget March Units (Linear Foot) Units Value Per Unit Value Requirement for the March Month 144,000 0.75 108000 Requirement for the April Month 75,840 0.75 56880 (40% of the April Month Requirement) 219,840 164,880 Opening Units of the March Month (Given) 50,000 0.75 37,500 Purchases in the month of March 169,840 127,380 2 Card Board Usage Budget - If Opening Inventory @ .75 per foot Units Per Unit Value Amount Requirement for the March Month Production 144,000 Opening Inventory 50,000 0.75 37,500 Balance from Current Purchases 94,000 0.75 70,500 Total Inventory Used 144,000 108,000 3 Card Board Usage Budget - If Opening Inventory @ .70 per foot Units Per Unit Value Amount Requirement for the March Month Production 144,000 Opening Inventory 50,000 0.70 35,000 Balance from Current Purchases 94,000 0.75 70,500 Total Inventory Used 144,000 105,500 Card Board Boxes Production Budget (Working Note ) Units (Card Board) March April Expected Production 12,000 15,800 Required linear feet of 2 foot wide card board 144,000 189,600 ( i.e For every 1 box , 12 lieaner feet required)