ABC Company has the following production budget for the months of January throughApril of 2012:January 25,000 February 30,000 March 40,00…
ABC Company has the following production budget for the months of January through April of 2012: January 25,000 February 30,000 March 40,00 April 20,000 One unit of finished product requires 5 pounds of raw material costing $ 2 per pound. The desired ending inventory each month is 40% of the next month’s requirement of raw material. In December, 2011, the ending inventory of raw material was 10,000 pounds.
Required: Prepare a raw materials purchase budget for the first quarter.
ABC Company has the following production budget for the months of January through
April of 2012:
January 25,000 February 30,000 March 40,00 April 20,000
One unit of finished product requires 5 pounds of raw material costing $ 2 per pound. The desired ending inventory each month is 40% of the next month’s requirement of raw material. In December, 2011, the ending inventory of raw material was 10,000 pounds.
Required: Prepare a raw materials purchase budget for the first quarter.
The management of James Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $200 cost per component was determined as follows:
Direct materials
Direct labor
Variable manufacturing overhead Fixed manufacturing overhead Total
$ 15 40 10 35 $100
James Industries uses 4,000 components per year. After Light, Inc., submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Light, Inc., James’s unused production facilities could be leased to another company for $50,000 per year.
Required:
. Indicate if the company should make or buy the component and the total dollar difference between these alternatives.
