Acc102 Principles of Managerial Accounting: E23-4 Safe' n’ Bright, Inc., produces outside doors

Acc102 Principles of Managerial Accounting

Exercise 23-4 Production and Direct Materials Budget
Safe’ n’ Bright, Inc., produces outside doors for installation on homes. The following information was gathered to prepare budgets for the upcoming year beginning January 1:
Sales forecast in units 5,500 doors
Finished goods inventory, Jan 1 620 doors
Target finished goods inventory, Dec 31 480 doors
Raw materials inventory - steel, Jan 1 40,000 pounds
Target inventory - steel, Dec 31 80,000 pounds
Raw materials inventory - glass, Jan 1 6,000 square feet
Target inventory - glass, Dec 31 4,000 square feet
Budgeted purchase price - steel $4 per pound
Budgeted purchase price - glass $2 per sq ft

The manufacture of each door requires 20 pounds of steel and 6 square feet of glass.

a. Prepare the production schedule in units for Safe‘n’ Bright.
b. Using the production schedule, develop the direct materials purchase budgets for steel and glass.
c. Why might safe ‘n’ Blight’s target level of steel inventory be higher than last year’s ending balance and its target level of glass inventory be lower than last year’sending balance?
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