MGT404 Assignment Solution

Prepared By: Raheel Raaj

Assignment Question
ABC Company prepares budget on quarterly basis and following information has been extracted from the books to prepare budget
for second quarter ending on 30th June. Budgeted sales for the next six months are as follows:

Sales Sales
Month (Units) Month (Units)
April 25000 May 55000
June 35000 July 30000
August 25000 September 20000

Management of the Company wants to maintain ending inventory to be 15% of the following month’s budgeted sales in units. On
March 31st, available inventory was 4,500 units.

Production Budget
April May June Quarterly July August September Quarterly
Sales Budget 25000 55000 35000 115000 30000 25000 20000 75000
Added Desired Ending Inventory 15% 8250 5250 4500 4500 3750 3000 2000 2000
Total Need 33250 60250 39500 119500 33750 28000 22000 77000
Less: Beginning Inventory 4500 8250 5250 4500 4500 3750 3000 4500
Require Production 28750 52000 34250 115000 29250 24250 19000 72500
MGT404 Assignment Solution
Prepared By: Raheel Raaj

2. Prepare the direct materials budget with the help of following information and
production budget prepared in requirement 1.

Seven kg of material is required to manufacture a unit of product and management wants

to maintain materials on hand at the end of each month equal to 18% of the following
month’s production. On March 31st
; 40,530 pounds of material were available in inventory.

Direct materials budget

April May June Quarterly July August September Quarterly
Production in units 28750 52000 34250 115000 29250 24250 19000 72500
Materials per unit 7 7 7 7 7 7 7 7
Production needs 201250 364000 239750 805000 204750 169750 133000 507500
Add: desired ending inventory 65520 43155 36855 36855 30555 23940 30000 30000
Total needed 266770 407155 276605 841855 235305 193690 163000 537500
Less: beginning inventory 40530 65520 43155 40530 36855 30555 23940 40503
Materials to be purchased 226240 341635 233450 801325 198450 163135 139060 496997