5 2.Prepare the company sEXERCISE 8-13 Production and Direct Materials Budgets (L03, L04]Tonga Toys manufactures and distributes a number of products to retailers. One of these products,Playclay, requires three pounds of material A135 in the manufacture of each unit. The company isnow planning raw materials needs for the third quarter-July, August, and September. Peak salesof Playclay occur in the third quarter of each year. To keep production and shipments movingsmoothly, the company has the following inventory requirements:a.The finished goods inventory on hand at the end of each month must be equal to 5,000 unitsplus 30% of the next month's sales. The finished goods inventory on June 30 is budgeted to be17,000 units..b.The raw materials inventory on hand at the end of each month must be equal to one-half of thefollowing month's production needs for raw materials. The raw materials inventory on June 30for material A135 is budgeted to be 64,500 pounds.C.The company maintains no work in process inventories.A sales budget for Playclay for the last six months of the year follows.Budgeted Salesin UnitsJuly.40,00050,000AugustSeptember.70,000**35,000October..November.December.20,00010,000Required:1. Prepare a production budget for Playclay for the months July, August, September, and October.2. Examine the production budget that you prepared. Why will the company produce more unitsthan it sells in July and August and less units than it sells in September and October?Prepare a direct materials budget showing the quantity of material A135 to be purchased forJuly, August, and September and for the quarter in total.3.

A budget is a financial plan which is associated with future. It could be prepared for the…

EXE Tonga Toys manufactures and distributes a number of "layclay, requires three pounds of material A135 in the manufacture of each unit. The c ow planning raw materials needs for the third quarter-July, August, and September. Playclay occur in the third quarter of each year. To keep production and shipmer moothly, the company has the following inventory requirements: The finished goods inventory on hand at the end of each month must be equal to plus 30% of the next month's sales. The finished goods inventory on June 30 is bud 17,000 units. hand at the end of each month must be equal to one

EXE Tonga Toys manufactures and distributes a number of "layclay, requires three pounds of material A135 in the manufacture of each unit. The c ow planning raw materials needs for the third quarter-July, August, and September. Playclay occur in the third quarter of each year. To keep production and shipmer moothly, the company has the following inventory requirements: The finished goods inventory on hand at the end of each month must be equal to plus 30% of the next month's sales. The finished goods inventory on June 30 is bud 17,000 units. hand at the end of each month must be equal to one

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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