ACTIVITY

ABC Company makes one (1) product. Its sales price is expected to be P80 per unit.Actual sales
forNovember 201A are 3,100 units, and 3,400 units for December 201A. ABC budgets its sales for the next
six (6) months for 201B:

January 2,700 April 2,500

February 2,600 May 2,900
March 2,750 June 3,000
All sales are on account. ABC collects its accounts as follows:
70% in the month of sale
20% in the month following sale
10% in the second month following sale
Uncollectible accounts are negligible and can be disregarded. The beginning inventory on January 1, 201B is 270
units. ABC desires an ending inventory of 10% of the next month’s budgeted sales

Each unit of finished goods requires 4 kg of raw materials that cost P3.00/kg. ABC desires an ending inventory of
direct materials equal to 20% of the following month’s production needs. Assume that ABC met this requirement at
the end of December, 201A. ABC makes all purchases on account and pays its accounts payable as follows: 60% in the
month of purchase and 40% in the month following purchase, Purchases in December 201A were P31,000.

Prepare the following by month for the first quarter of 201B and for the first quarter as a whole.
A. Sales budget (4 items)

Sales Budget
January February March Total
Sales units 2,700 2,600 2,750 8,050

B. Production budget ( 4items)

Production Budget
January February March
Sales in units 2,700 2,600 2,750
Budgeted Ending Inventory Units ( 10% in the
269 275 250
second month following scale
Total 2,960 2,875 3,000
budgeted Beginning Inventory 270 260 275
Production Required 2,690 2,165 2,725

C. Purchaser budget (4 items)

Purchase Budget
Janurary February March
Budgeted Production Units 2,690 2,615 2,725
x Direct Materials Required per production unit (kg) 4 kg 4kg 4kg
Direct Materials Required per production (kg) 10,760 10,460 10,900
Budgeted Ending Direct Materials (kg) 2,092 2,180 2,032
Budgeted Beginning Direct Materials (kg) 2,152 2,092 2,180
Budgeted Direct Materials (kg) 10,700 10,548 10,752
x Cost per kg P3 P3 P3
Budgeted Direct Materials Purchase in peso P32,100 P31,644 P32,256
uary 1, 201B is 270
ales

ending inventory of
t this requirement at
as follows: 60% in the
A were P31,000.

March Total
2,750 8,050
250 785

3,000 8,835
275 805
2,725 8,030

March Total
2,725 8,050
4kg 4kg
 10,900 32,120
2,032 6,304
2,180 6,424
10,752 32,000
P3 P3
P32,256 P96,000