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31 May, 10:52

Croy Inc. has the following projected sales for the next five months: Month Sales in Units April 3,470 May 3,830 June 4,570 July 4,170 August 3,970 Croy's finished goods inventory policy is to have 50 percent of the next month's sales on hand at the end of each month. Direct materials costs $2.80 per pound, and each unit requires 2 pounds. Direct materials inventory policy is to have 50 percent of the next month's production needs on hand at the end of each month. Direct materials on hand at March 31 totaled 3,650 pounds. Required: 1. Determine budgeted production for April, May, and June. 2. Determine budgeted cost of materials purchased for April and May.

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  1. 31 May, 14:43
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    1. Production units for April 3,650 units

    Production units for May 4,200 units

    Production units for June 4,370 units

    2. Budgeted cost of materials for April = $ 21,980

    Budgeted cost of materials for April = $ 23,996

    Explanation:

    Computation of budgeted production units

    April May June

    Units Units Units

    Ending Inventory - 50 % of next month 1,915 2,285 2,085

    Add: Sales 3,470 3,830 4,570

    Less: Opening Inventory-50% of current month (1,735) (1,915) (2,285)

    Production units for the month 3,650 4,200 4,370

    Computation of cost of materials

    Units production 3,650 4,200 4,370

    Material requirement per unit - 2 pounds

    Total material requirement for production 7,300 8,400 8,740

    Closing inventory-50% next month production 4,200 4,370

    Opening inventory-50% of current production (3,650) (4,200)

    Total material requirement for production 7,850 8,570

    Cost per pound of direct material $ 2.80

    Total direct material Budget $ 21,980 $ 23,996
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