Determine niagra chemical companys production budget

Assignment Help Accounting Basics

Reference no: EM131928487

Problem

Niagra Chemical Company produces three products using three different continuous processes. The products are Yarex, Darol, and Norex. Projected sales in gallons for the three products for the years 20x2 and 20x3 are as follows:

	20x2	20x3
Yarex	130,000	140,000
Darol	90,000	80,000
Norex	60,000	70,000

• Because of the continuous nature of Niagra's processes, work-in-process inventory for each of the products remains constant throughout the year.

• Inventories are planned for each product so that the projected finished-goods inventory at the beginning of each year is equal to 6 percent of that year's projected sales.

• The conversion requirements in hours per gallon for the three products are Yarex, 0.09 hours; Darol, 0.12 hours; and Norex, 0.18 hours. The conversion cost of $20 per hour is considered 100 percent variable.

• The raw-material requirements of the three products are shown in the following chart.

Raw Material	Units	Unit Price		Yarex	Darol	Norex
Gamma	pounds	$	10	0.2	0.4	-
Murad	pounds		8	0.4	-	0.5
Islin	gallons		5	1.0	0.7	0.5
Tarden	gallons		12	-	0.3	0.5

• Raw-material inventories are planned so that each raw material's projected inventory at the beginning of a year is equal to 15 percent of the previous year's usage of that raw material.

Required:

1. Determine Niagra Chemical Company's production budget (in gallons) for the three products for 20x2.

2. Determine Niagra Chemical Company's conversion cost budget for 20x2.

3. Assuming the 20x1 usage of Islin is 235,000 gallons, determine the company's raw-material purchases budget (in dollars) for Islin for 20x2.

4-a. Assume that for 20x2 production, Niagra Chemical Company could replace the raw material Islin with the raw material Philin. The usage of Philin would be the same as the usage of Islin. However, Philin would cost 20 percent more than Islin and would cut production times on all three products by 10 percent. Compare cost of using Philin over using Islin.

4-b. Which raw material should the management use for the 20x2 production?

Reference no: EM131928487

Questions Cloud

What is leash n collars internal growth rate : The firm has no preferred stock outstanding. What is Leash N Collar's internal growth rate? (Do not round intermediate steps.)

What is the geometric return for the stock : A stock has had returns of -18.8 percent, 29.29 percent, 21.6 percent, -9.9 percent, 34.6 percent, and 26.8 percent over the last six years.

Calculate the varialbe overhead spending variance : Actual Variable overhead was $140,000 in December. Calculate the varialbe overhead spending variance and variable overhead efficiencly variance.

Annual rate of return : You want to know just how big of a "nest egg" you can create if you take her advice and then actually average an 8% annual rate of return.

Determine niagra chemical companys production budget : Determine Niagra Chemical Company's production budget for the three products for 20x2. Determine Niagra Chemical Company's conversion cost budget for 20x2.

What is the current fair price of a 1 year zero coupon bond : What is the current fair price of a 1.5 year bond with face value 100, carrying an annual coupon of 10 percent, paid two times per year?

Choose between project a and project b : You have to choose between project A and Project B based on the following data. Which one will you select and why? (cite references if used)

How much principal is paid off in the tenth payment : The effective annual interest rate on the loan is 10%. How much principal is paid off in the tenth payment?

Disadvantage of completing itemized financial statements : What is the advantage/disadvantage of completing itemized financial statements in both the managerial and financial forms of accounting?

User Account

All Pages