Wyatt Company has budgeted the following unit sales:
The finished goods units on hand on December 31, 2010, was 2,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2010.
Instructions
For the first quarter of 2011, prepare (1) a production budget and (2) a direct materials budget.

Question

Wyatt Company has budgeted the following unit sales:  
The finished goods units on hand on December 31, 2010, was 2,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2010.
Instructions
For the first quarter of 2011, prepare (1) a production budget and (2) a direct materials budget.

Quizplus · Accepted Answer

The Answer of Wyatt Company has budgeted the following unit sales:  
The finished goods units on hand on December 31, 2010, was 2,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2010.
Instructions
For the first quarter of 2011, prepare (1) a production budget and (2) a direct materials budget.

Wyatt Company Has Budgeted the Following Unit Sales