Assignment: Chapter 9 LO 1, 2
1.
Preparing a Sales Budget
Patrick Inc. sells industrial solvents in five-gallon drums. Patrick expects the following units to be sold
in the first three months of the coming year:
The average price for a drum is $38.
Prepare a sales budget for the first three months of the coming year, showing units and sales revenue
by month and in total for the quarter. Do not include a multiplication symbol as part of your answer.
Patrick Inc.
Sales Budget
For the Coming Quarter
January February March 1st Quarter Total
Units
Price
Sales
$
$
$
$
$
$
$
$
2.
Preparing a Production Budget
Patrick Inc. makes industrial solvents. In the first four months of the coming year, Patrick expects the
following unit sales:
Patrick's policy is to have 25 percent of next month's sales in ending inventory. On January 1, it is
expected that there will be 4,600 drums of solvent on hand.
Prepare a production budget for the first quarter of the year. Show the number of drums that should
be produced each month as well as for the quarter in total. If required, round your answers to the
nearest whole unit.
Patrick
Inc.
Production
Budget
For the Coming
Quarter
January
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
February
March
Total
3.
Preparing a Direct Materials Purchases Budget
Patrick Inc. makes industrial solvents sold in five-gallon drums. Planned production in units for the
first three months of the coming year is:
January
40,000
February 50,000
March
65,000
Each drum requires 6 gallons of chemicals and one plastic drum. Company policy requires that ending
inventories of raw materials for each month be 20 percent of the next month's production needs. That
policy was met for the ending inventory of December in the prior year. The cost of one gallon of
chemicals is $2.00. The cost of one drum is $1.60.
1. Calculate the ending inventory of chemicals in gallons for December of the prior year, and for
January and February. What is the beginning inventory of chemicals for January? Round your answers
to the nearest whole gallon.
Ending inventory for December:
Ending inventory for January:
Ending inventory for February:
Beginning inventory for January:
_________________
_________________
gallons
gallons
_________________
_________________
gallons
gallons
2. Prepare a direct materials purchases budget for chemicals for the months of January and February.
Round Gallons per unit to one decimal place. Round Price per gallon to the nearest cent. Round Dollar
purchases to the nearest dollar. Round all the other values to the nearest whole unit. Do not include a
multiplication symbol as part of your answer.
Patrick Inc.
Direct Materials Purchases Budget - Chemicals in Gallons
For the Months of January and February
January
Production in units
February
Gallons per unit
Gallons for production
Desired ending inventory
Needed
Less: Beginning inventory
Direct materials to be purchased
Price per gallon
$
$
Dollar purchases
$
$
3. Calculate the ending inventory of drums for December of the prior year, and for January and
February. Round your answers to the nearest whole drum.
Ending inventory for December:
Ending inventory for January:
Ending inventory for February:
_________________
_________________
_________________
drums
drums
drums
4. Prepare a direct materials purchases budget for drums for the months of January and February.
Round Drums per unit to one decimal place. Round Price per drum to the nearest cent. Round Dollar
purchases to the nearest dollar. Round all the other values to the nearest whole unit. Do not include a
multiplication symbol as part of your answer.
Patrick
Inc.
Direct Materials Purchases Budget Drums
For the Months of January and
February
January
February
Price per drum
$
$
Dollar purchases
$
$
Production in units
Drums per unit
Drums for production
Desired ending inventory
Needed
Less: Beginning inventory
Direct materials to be purchased
4.
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Cornerstone Exercise 9-24 (Algorithmic)
Preparing a Direct Labor Budget
Patrick Inc. makes industrial solvents. Planned production in units for the first three months of the
coming year is:
January
40,000
February 55,000
March
60,000
Each drum of industrial solvent takes 0.3 direct labor hours. The average wage is $17.10 per hour.
Prepare a direct labor budget for the months of January, February, and March, as well as the total for
the first quarter. Do not include a multiplication symbol as part of your answer.
Patrick Inc.
Direct Labor Budget
For the Coming First Quarter
Direct Labor Budget:
January February March Total
Units to be produced
Direct labor hrs per unit
Total direct labor hrs
Wage rate
$
$
$
$
Direct labor cost
$
$
$
$
5.
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Exercise 9-35
Production Budget
Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. Projected sales (number
of speakers) for the coming five quarters are as follows:
The vice president of sales believes that the projected sales are realistic and can be achieved by the
company.
Stillwater Designs needs a production budget for each product (representing the amount that must be
outsourced to manufacturers located in Asia). Beginning inventory of S12L7 for the first quarter of
2012 was 340 boxes. The company’s policy is to have 20 percent of the next quarter’s sales of S12L7
in ending inventory. Beginning inventory of S12L5 was 170 boxes. The company’s policy is to have 30
percent of the next quarter’s sales of S12L5 in ending inventory.
Prepare a production budget for S12L7 for each quarter for 2012 and for the year in total.
Stillwater
Designs
Production Budget for
S12L7
For the Year Ended December 31,
2012
1st Qtr.
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
2nd Qtr.
3rd Qtr.
4th Qtr.
Total
Prepare a production budget for S12L5 for each quarter for 2012 and for the year in total.
Stillwater Designs
Production Budget for S12L5
For the Year Ended December 31, 2012
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
6.
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Exercise 9-36 (Algorithmic)
Production Budget and Direct Materials Purchases Budgets
Smee Inc. produces all-natural organic peanut butter. The peanut butter is sold in 12-ounce jars. The
sales budget for the first four months of the year is as follows:
Unit Sales Dollar Sales ($)
January
60,000
$114,000
February
70,000
133,000
March
80,000
152,000
April
50,000
95,000
Company policy requires that ending inventories for each month be 10 percent of next month's sales.
At the beginning of January, the inventory of peanut butter is 35,000 jars.
Each jar of peanut butter needs two raw materials: 24 ounces of peanuts and one jar. Company policy
requires that ending inventories of raw materials for each month be 20 percent of the next month's
production needs. That policy was met on January 1.
1. Prepare a production budget for the first quarter of the year. Show the number of jars that should
be produced each month as well as for the quarter in total.
Smee
Inc.
Production
Budget
For the First Quarter of the
Year
January
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
February
March
Total
2a. Prepare a direct materials purchases budget for jars for the months of January and February. Do
not include a multiplication symbol as part of your answer.
Smee, Inc.
Direct Materials Purchases Budget for Jars
For January and February
January February Total
Production
Jar
Jars for production
Desired ending inventory
Total needs
Less: Beginning inventory
Jars purchased
2b. Prepare a direct materials purchases budget for peanuts for the months of January and February.
Do not include a multiplication symbol as part of your answer.
Smee,
Inc.
Direct Materials Purchases Budget for
Peanuts
For January and
February
January
February
Total
Production
Ounces
Ounces for production
Desired ending inventory
Total needs
Less: Beginning inventory
Ounces purchased
7.
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Exercise 9-37
Production Budget
Pumpro Inc. produces submersible water pumps for ponds and cisterns. The unit sales for selected
months of the year are as follows:
Company policy requires that ending inventories for each month be 30 percent of next month’s sales.
However, at the beginning of April, due to greater sales in March than anticipated, the beginning
inventory of water pumps is only 40,000.
Prepare a production budget for the second quarter of the year. Show the number of units that should
be produced each month as well as for the quarter in total.
Pumpro Inc.
Production Budget
For the Second Quarter
April May June Total
Sales
Desired ending inventory
Total needs
Less: Beginning inventory
Units produced
8.
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Exercise 9-38
Direct Materials Purchases Budget
You may use the attached spreadsheet to help you complete this activity, but you are not required to
do so. You will find the spreadsheet by clicking on the link in the drop-down menu above.
Fang Company produces decorative plastic items, including hollow plastic pumpkins often used by
trick-or-treaters for Halloween. Each pumpkin requires about 5 ounces of plastic costing $0.08 per
ounce. Fang molds the plastic into a pumpkin shape and applies decoration to the outside of each
pumpkin. Fang has budgeted production of the pumpkins for the next four months as follows:
Inventory policy requires that sufficient plastic be in ending monthly inventory to satisfy 20 percent of
the following month’s production needs. The inventory of plastic at the beginning of July equals
exactly the amount needed to satisfy the inventory policy.
Prepare a direct materials purchases budget for July, August, and September, showing purchases in
units and in dollars for each month and in total.
Fang
Company
Direct Materials Purchases
Budget
For July, August, and
September
July
Units to be produced
Direct materials per unit
Production needs
Desired ending inventory
Total needs
Less: Beginning inventory
Direct materials to be purchased
August
September
Total
Cost per ounce
$ 0.08 $ 0.08 $ 0.08
$ 0.08
Total purchase cost
$
$
$
$
9.
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Exercise 9-34
Sales Budget
Assume that Stillwater Designs produces two automotive subwoofers: S12L7 and S12L5. The S12L7
sells for $475, and the S12L5 sells for $300. Projected sales (number of speakers) for the coming five
quarters are as follows:
The vice president of sales believes that the projected sales are realistic and can be achieved by the
company.
1. Prepare a sales budget for each quarter of 2012 and for the year in total. Show sales by product
and in total for each time period. Do not include a multiplication symbol as part of your answer.
Stillwater Designs
Sales Budget
For the Year Ended December 31, 2012
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total
S12L7:
Units
Price
$
$
$
$
$
Sales
$
$
$
$
$
Price
$
$
$
$
$
Sales
$
$
$
$
$
$
$
$
$
S12L5:
Units
Total sales
2. How will Stillwater Designs use this sales budget?
The input in the box below will not be graded, but may be reviewed and considered by your instructor.
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