Ive been trying to figure out one little part of this question to no avail, maybe you folks could shed some light on this...
Exercise 19-36 PRODUCTION BUDGET AND DIRECT MATERIALS
Seafood Inc. produces shrimp in cans. The sales budget for the first four months of the year is as follows:
January February March April
200,000 240,000 220,000 200,000
Dollar Sales ($)
150,000 180,000 165,000 150,000
Company policy requires that ending inventories for each month be 35 percent of next month’s sales. At the beginning of January, the inventory of shrimp is 36,000 cans.
Each can of shrimp needs two raw materials: four ounces of shrimp and one can. Company policy requires that ending inventories of raw materials for each month be 20 percent of the next month’s production needs. That policy was met on January 1.
1. Prepare a production budget for the first quarter of the year. Show the number of cans that should be produced each month as well as for the quarter in total.
2. Prepare separate direct materials purchases budgets for cans and for shrimp for the months of January and February.
I need help with number 2, how do you find the Beginning inventory for the direct materials budget?