DSP Products Inc $$\begin{array} { l l } \text { April } & \text { 2500 urits } \\\text { May } & 4000 \text { urits } \\\text { June } & 6800 \\\end{array}$$

question 38

Essay

DSP Products Inc.makes and sells boat tarps.The purchasing manager has prepared the production budget for the second quarter of 2009 as follows:
$$\begin{array} { l l } \text { April } & \text { 2500 urits } \\\text { May } & 4000 \text { urits } \\\text { June } & 6800 \\\end{array}$$
Production for both July and August is expected to be 7000 units each.Each completed unit of finished product requires 50 metres of a heavy-duty plastic material which costs $1.40 per metre.The company has determined that it needs 15 per cent of next month's raw material needs on hand at the end of each month.The company had 18 750 metres of plastic material on hand at the end of March.
It is the company's policy to pay for one-half of a month's direct materials purchases in the month of purchase and the remainder in the following month.
Required:
A. Prepare a direct matenals purchases budget for the second quarter of 2009.
B. Assuming all cash disbursements in the month of June will be for direct materials, prepare a cash disbursements budget for the month of June.

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Definitions:

Balance Sheet

A financial statement that presents a company's assets, liabilities, and shareholders' equity at a specific point in time, showing its financial position.

Cost of Goods Sold

The expenses directly linked to the creation of a company's sold products, comprising both materials and labor.

Factory Rent

Refers to the cost incurred for renting a facility or space for manufacturing operations, a common type of fixed expense for manufacturers.

Direct Labor

The price of paying staff who are directly participating in the manufacturing of goods or provision of services.