6. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.What is the purchases budget for February?A) $12,905.60B) $21,142.40C) $11,571.20D) $12,480.00E) None of the choices are correct

Question

6.   Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.What is the purchases budget for February?A) $12,905.60B) $21,142.40C) $11,571.20D) $12,480.00E) None of the choices are correct

athirah yusoff · Accepted Answer

Final Answer : A, Explanation :  The correct answer is A. The purchases budget for February is $12,905.60. This is calculated as follows:Fabric needed for February = (600 bears x 0.8 yards per bear) + (800 bears x 0.8 yards per bear x 25%) = 1,040 yardsFabric to be purchased = 1,040 yards - 80 yards = 960 yardsCost of fabric to be purchased = 960 yards x $15 per yard = $14,400Stuffing needed for February = (600 bears x 2 pounds per bear) + (800 bears x 2 pounds per bear x 10%) = 1,440 poundsStuffing to be purchased = 1,440 pounds - 100 pounds = 1,340 poundsCost of stuffing to be purchased = 1,340 pounds x $4 per pound = $5,360Total purchases budget for February = $14,400 + $5,360 = $19,760Less: Beginning inventory of fabric and stuffing = $6,854.40Purchases budget for February = $19,760 - $6,854.40 = $12,905.60

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