The Howell Company has prepared a sales budget of 46,000 finished units for a 3- month period.
Question:
The Howell Company has prepared a sales budget of 46,000 finished units for a 3- month period. The company has an inventory of 10,000 units of finished goods on hand at December 31 and has a target finished goods inventory of 13,000 units at the end of the succeeding quarter.
It takes 2 gallons of direct materials to make one unit of finished product. The company has an inventory of 62,000 gallons of direct materials at December 31 and has a target ending inventory of 52,000 gallons at the end of the succeeding quarter.
Required
1. How many gallons of direct materials should Howell Company purchase during the 3 months ending March 31?
2. What questions might the CEO ask of the operating manager when reviewing the budget?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
1 Production Budget Finished Goods units Budgeted sales 46000 Add target ending finished goods inven...View the full answer
Managerial Accounting Decision Making and Motivating Performance
ISBN: 978-0137024872
1st edition
Authors: Srikant M. Datar, Madhav V. Rajan
