Metal Parts inc. is preparing its monthly budget for 2019.
Metal Parts inc. is preparing its monthly budget for 2019. The following estimates and information are
available.
DL. Each unit requires S hours of direct labour and 16 pounds of metal to make.
They have 5920 pounds of metal already in inventory. To prepare for supply disruptions of
metal, the company likes to keep monthly ending inventory of metal high enough to meet the
next two month's production requirements. In practice, their attempts at this might not always
work out.
• Direct labour costs $23 per hour.
Accounts payable are paid 60% in the month of purchase and 40% in the following month.
Each pound of metal costs $10.50
In December 2018, 6000 pounds of metal were purchased and 1,050 hours of Direct Labour
worked.
• Sales are estimated as follows:
Month
Amount
November 2018 actual $270,000
December actual
$240,000
$330,000
Jan 2019
Feb
$180,000
$510,000
S600,000
$1,110,000
$1,770,000
Mar
Apr
May
June
$1,830,000
$1,110,000
$1,020,000
$660,000
$240,000
$180,000
$450,000
$480,000
$600,000
July
Aug
Sept
Oct
Nov
Dec
Jan 2020
Feb
Mar
Metal Parts Inc. keeps a minimum amount of the following:
Cash
A minimum of $2,000,000
Finished units
Ending inventory equal to 25% of next month's sales requirements
Inventory of finished units from December 2018 is equal to the targeted inventory policy.
All sales are on account.
