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Becker Bikes manufactures tricycles
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
Expert Solution
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 |
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