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Becker Bikes manufactures tricycles

Accounting

Becker Bikes manufactures tricycles. The company expects to sell 510 units in May and 640 units in June. Beginning and ending finished goods for May is expected to be 175 and 140 units, respectively. June’s ending finished goods is expected to be 150 units. Each unit requires 3 wheels at a cost of $21 per wheel. Becker requires 20 percent of next month’s material production needs on hand each month. July’s production units is expected to be 610 units. Compute Becker’s direct materials purchases budget with respect to wheels for May and June. What is the budgeted cost of wheels purchased for May and June

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Answer:

 

Material Purchase Budget
  May June
Production (Note 475 650
Wheel required per unit 3 3
Total Wheels required 1425 1950
Add: Closing (1950*20% , 1830 *20%) 390 *366
Less: Opening -285 -390
Wheels required to be purchased 1530 1926

Working Note :

Production May June
Sales 510 640
Add: Closing 140 150
Less: Opening -175 -140
Production 475 650

* June Closing Stock = Production units of July x Wheels required per unit x 20% = 610 * 3 * 20% = 366 wheels

Budgeted purchase cost
  May June
Wheels required to be purchased 1530 1926
Cost per Wheel   $            21.00 $            21.00
Purchase cost of direct material - closure   $    32,130.00 $    40,446.00