Revenues, production, and purchases budget. The Mochizuki Co. ...

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Revenues, production, and purchases budget.
 
  The Mochizuki Co. in Japan has a division that manufactures two-wheel motorcycles. Its budgeted sales for Model G in 2015 is 915,000 units. Mochizuki's target ending inventory is 70,000 units, and its beginning inventory is 115,000 units. The company's budgeted selling price to its distributors and dealers is 405,000 yen () per motorcycle.
   Mochizuki buys all its wheels from an outside supplier. No defective wheels are accepted. (Mochizuki's needs for extra wheels for replacement parts are ordered by a separate division of the company.) The company's target ending inventory is 72,000 wheels, and its beginning inventory is 55,000 wheels. The budgeted purchase price is 18,000 yen () per wheel.
 
  Required:
  1. Compute the budgeted revenues in yen.
  2. Compute the number of motorcycles that Mochizuki should produce.
  3. Compute the budgeted purchases of wheels in units and in yen.
  4. What actions can Mochizuki's managers take to reduce budgeted purchasing costs of wheels assuming the same budgeted sales for Model G?

Question 2

An account balance is the difference between total debits and total credits in an account.
  Indicate whether the statement is true or false

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Answer to Question 1

1. 915,000 motorcycles  405,000 yen = 370,575,000,000 yen

2. Budgeted sales (motorcycles) 915,000
Add target ending finished goods inventory 70,000
Total requirements 985,000
Deduct beginning finished goods inventory 115,000
Units to be produced 870,000

3. Direct materials to be used in production,
870,000  2 (wheels) 1,740,000
Add target ending direct materials inventory 72,000
Total requirements 1,812,000
Deduct beginning direct materials inventory 55,000
Direct materials to be purchased (wheels) 1,757,000
Cost per wheel in yen  18,000
Direct materials purchase cost in yen 31,626,000,000

4. Note the relatively small inventory of wheels. In Japan, suppliers tend to be located very close to the major manufacturer. Inventories are controlled by just-in-time and similar systems. Indeed, some direct materials inventories are almost nonexistent. Nevertheless, Yoshida's managers would want to check why the target ending inventory of wheels (72,000) is greater than the beginning inventory of 55,000. Could the production process be streamlined and made more efficient to reduce the need to hold more inventories?
Furthermore, Yoshida could help improve quality, efficiency, and productivity of its wheels supplier to reduce the cost of manufacturing wheels and hence the price the supplier charges Yoshida. Toyota routinely aids its suppliers in this way and also reduces costs through better coordination between suppliers and the company.

Answer to Question 2

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