Chicago Furniture Company produces combination desk and chair sets for the eleme

Question

Chicago Furniture Company produces combination desk and chair sets for the elementary schools in the Midwest. As the second quarter is progressing it is important for the controller to complete a budget for the third quarter. The sales department manager has provided the following forecast.

7,600 desk combos

In order to ensure Just-in-Time (JIT) deliveries are maintained in accordance with the needs of the schools Chicago Furniture Company has a standing policy that the inventory at the end of each month must be equal to 40% of the following month’s forecasted sales. On July 1st there will be 3,200 desk combos in inventory.

The building of each desk combo requires 12 board feet of pine planks which cost $0.70 per foot. In order to maintain proper inventory for building the desk combos the department must have 30% of the next month’s production requirements.

Using Microsoft Excel, create a spreadsheet for the production and material purchases budget for the 3rd Quarter.

July 8,000 desk combos August 8,700 desk combos September

7,600 desk combos

October 8,700 desk combos November 8,800 desk combos

In order to ensure Just-in-Time (JIT) deliveries are maintained in accordance with the needs of the schools Chicago Furniture Company has a standing policy that the inventory at the end of each month must be equal to 40% of the following month’s forecasted sales. On July 1st there will be 3,200 desk combos in inventory.

The building of each desk combo requires 12 board feet of pine planks which cost $0.70 per foot. In order to maintain proper inventory for building the desk combos the department must have 30% of the next month’s production requirements.

Using Microsoft Excel, create a spreadsheet for the production and material purchases budget for the 3rd Quarter.

Explanation / Answer

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Production Budget July August September October November Sales 8000 8700 7600 8700 8800 Add: closing stock (40% of Next month sales) 3480 3040 3480 3520 Total stock required 11480 11740 11080 12220 Less: Opening Stock -3200 -3480 -3040 -3480 Production Required 8280 8260 8040 8740 Material purchase Budget July August September October Production Required 8280 8260 8040 8740 x DM req per unit 12 12 12 12 DM required of production 99360 99120 96480 104880 Add: Budgeted Ending DM 30% 29736 28944 31464 Less: Beginning DM 29808 29736 28944 Budgeted DM purchase 99288 98328 99000 Cost per foot $0.70 $0.70 $0.70 Budgeted DM purchase in $ $69,501.60 $68,829.60 $69,300.00

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