1. Introduction: A purchases budget contains the amount of inventory that a company must purchase during the budget period. The amount stated in the budget is the amount needed to ensure that there is sufficient inventory on hand to meet customer orders for products. To calculate: To prepare a merchandise purchases budget (in units) for each product for each of the months of April, May and June respectively.

Question

Belle Garments manufactures customized T-shirts for football teams. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The business operates at a profit margin of 33% on sales. Belle Garments expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2025. At the end of December 2024, Belle Line Garments reported work in process inventory of $93,980 - Job FBT 101 - $51,000 & Job FBT 102 - $42,980 The following events occurred during January 2025. i) Purchased materials on account, $388,000. The purchase attracted freight charges of $4,000 ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Job # FBT 101 FBT 102 FBT 103 FBT 104 Direct Materials $70,220 97,500 105,300 117,000 iv) Issued indirect materials to production, $30,000. Direct Labour $61,200…

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Chapter 22, Problem 5BPSB

To determine

1.

Introduction:

A purchases budget contains the amount of inventory that a company must purchase during the budget period. The amount stated in the budget is the amount needed to ensure that there is sufficient inventory on hand to meet customer orders for products.

To calculate:

To prepare a merchandise purchases budget (in units) for each product for each of the months of April, May and June respectively.

To determine

2.

Introduction:

A purchases budget contains the amount of inventory that a company must purchase during the budget period. The amount stated in the budget is the amount needed to ensure that there is sufficient inventory on hand to meet customer orders for products.

To determine:

To analyze the business conditions that might lead to inventory levels becoming too high.

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Belle Garments manufactures customized T-shirts for football teams. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The business operates at a profit margin of 33% on sales. Belle Garments expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2025. At the end of December 2024, Belle Line Garments reported work in process inventory of $93,980 - Job FBT 101 - $51,000 & Job FBT 102 - $42,980 The following events occurred during January 2025. i) Purchased materials on account, $388,000. The purchase attracted freight charges of $4,000 ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Job # FBT 101 FBT 102 FBT 103 FBT 104 Direct Materials $70,220 97,500 105,300 117,000 iv) Issued indirect materials to production, $30,000. Direct Labour $61,200…

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