Andrews McNeel Inc. plans to sell 200,000 units of finished product in July 2012. Management anticipates a growth rate in sales of 3% per month thereafter and desires a monthly ending finished-goods inventory (in units) of 60% of the following month's estimated sales. There are 200,000 completed units in the June 30, 2012 inventory.
Each unit of finished product requires three pounds of direct material at a cost of $2.50 per pound. There are 600,000 pounds of direct material in inventory on June 30, 2012.
Required:
A. Prepare a production budget for the quarter ended September 30, 2012. Note: For both part "A" and part "B" of this problem, prepare your budget on a quarterly (not monthly) basis.
B. Independent of your answer to part "A," assume that Andrews McNeel plans to produce 200,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 20% of current production usage, compute the cost of direct material purchases for the quarter.

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The Answer of Andrews McNeel Inc. plans to sell 200,000 units of finished product in July 2012. Management anticipates a growth rate in sales of 3% per month thereafter and desires a monthly ending finished-goods inventory (in units) of 60% of the following month's estimated sales. There are 200,000 completed units in the June 30, 2012 inventory.
Each unit of finished product requires three pounds of direct material at a cost of $2.50 per pound. There are 600,000 pounds of direct material in inventory on June 30, 2012.
Required:
A. Prepare a production budget for the quarter ended September 30, 2012. Note: For both part "A" and part "B" of this problem, prepare your budget on a quarterly (not monthly) basis.
B. Independent of your answer to part "A," assume that Andrews McNeel plans to produce 200,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 20% of current production usage, compute the cost of direct material purchases for the quarter.