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Problem
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 5,300; second quarter 6,700; third quarter 7,800
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:
7,430 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. 4 pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.
(a) Prepare a production budget by quarters for the 6-month period ended June 30, 2017.
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