Chapter 9, Problem 9.6E

On January 1, 2017, the Hardin Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2017.

Sales units: First quarter 5,000; second quarter 6,000; third quarter 7,000.

Ending raw materials inventory: 40% of the next quarter’s production requirements.

Ending finished goods inventory: 25% of the next quarter’s expected sales units.

Third-quarter production: 7,200 units.

The ending raw materials and finished goods inventories at December 31, 2016, follow the same percentage relationships to production and sales that occur in 2017. Three pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.

Instructions

(a) Prepare a production budget by quarters for the 6-month period ended June 30, 2017.

(b) Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2017.