1. Sales and production budget.

The Mendez Company expects sales in 2019 of 200,000 units of serv ing trays.
Mendez’s beginning inventory for 2019 is 15,000 trays and its target ending inventory
is 25,000 trays. Compute the number of trays budgeted for production in 201

Answer :
Sales and production budget.
Budgeted sales in units 200,000
Add target ending finished goods inventory 27,000
Total requirement 227,000
Deduct beginning finished goods inventory (15,000)
Units to be produced 212,000

2. Direct material budget.

Inglenook Co. produces wine. The company expects to produce 2,500,000 two-liter
bottles of Chablis in 2019. Inglenook purchases empty glass bottles from an outside
vendor. Its target ending inventory of such bottles is 80,000; its beginning inventory is
50,000. For simplicity, ignore breakage. Compute the number of bottles to be
purchased in 2019

Answer :
Direct materials purchases budget.
Direct materials to be used in production (bottles) 2,500,000
Add target ending direct materials inventory (bottles) 80,000
Total requirements (bottles) 2,580,000
Deduct beginning direct materials inventory (bottles) (50,000)
Direct materials to be purchased (bottles) 2,530,000
3. Budgeting material purchases.
The Mahoney Company has prepared a sales budget of 45,000 finished units for a
three-month period. The company has an inventory of 16,000 units of finished goods
on hand at December 31 and has a target finished goods inventory of 18,000 units at
the end of the succeeding quarter. It takes three gallons of direct materials to make
one unit of finished product. The company has an inventory of 60,000 gallons of
direct materials at December 31 and has a target ending inventory of 50,000 gallons at
the end of the succeeding quarter. How many gallons of direct materials should be
purchased during the three months ending March 31

Answer :
Budgeting material purchases.
Production Budget: Finished Goods
(units)
Budgeted sales 45,000
Add target ending finished goods inventory 18,000
Total requirements 63,000
Deduct beginning finished goods inventory (16,000)
Units to be produced 47,000

Direct Materials Purchases Budget:

Direct Materials (in gallons)
Direct materials needed for production (60,000x 3) 180,000
Add target ending direct materials inventory 50,000
Total requirements 230,000
Deduct beginning direct materials inventory (60,000)
Direct materials to be purchased 170,000

4. Revenues, production, and purchases budgets.

The Suzuki Co. in Japan has a division that manufactures two-wheel motorcycles. Its
budgeted sales for Model G in 2013 is 900,000 units. Suzuki’s target ending inventory
is 80,000 units, and its beginning inventory is 100,000 units. The company’s budgeted
selling price to its distributors and dealers is 400,000 yen (¥) per motorcycle.
Suzuki buys all its wheels from an outside supplier. No defective wheels are accepted.
(Suzuki’s needs for extra wheels for replacement parts are ordered by a separate
division of the company.) The company’s target ending inventory is 60,000 wheels,
and its beginning inventory is 50,000 wheels. The budgeted purchase price is 16,000
yen (¥) per wheel.
Required
1. Compute the budgeted revenues in yen.
2. Compute the number of motorcycles to be produced.
3. Compute the budgeted purchases of wheels in yen.

Answer :
1. 900,000 motorcycles x 400,000 yen = 360,000,000,000 yen

2. Budgeted sales (motorcycles) 900,000

Add target ending finished goods inventory 80,000
Total requirements 980,000
Deduct beginning finished goods inventory (100,000)
Units to be produced 880,000

3. Direct materials to be used in production,

880,000 × 2 (wheels) 1,760,000
Add target ending direct materials inventory 60,000
Total requirements 1,820,000
Deduct beginning direct materials inventory (50,000)
Direct materials to be purchased (wheels) 1,770,000
Cost per wheel in yen x 16,000
Direct materials purchase cost in yen ¥28,320,000,000