McLeod sells trash cans for $12 each. Budgeted production for the next four months is:
April
26,000 units
May
46,000 units
June
29,000 units
McLeod desires to have trash cans on hand at the end of each month equal to 20 percent of the following month's budgeted sales in units. On March 31, McLeod had 4,000 completed units on hand. The number of trash cans to be produced in April and May are 26,000 and 46,000, respectively. Seven pounds of plastic are required for each trash can. At the end of each month, McLeod desires to have 10 percent of the following month's production material needs on hand. At March 31, McLeod had 18,200 pounds of plastic on hand. The materials used in production costs $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor.
Instructions
What is the quantity of desired ending inventory of raw materials (plastic) at May 31? What is the cost of the raw materials inventory that would appear on the May 31 budgeted balance sheet? Show your computations.