Really Cool has the following budgeted unit sales for the next six-month period:
ID: 2460473 • Letter: R
Question
Really Cool has the following budgeted unit sales for the next six-month period:
Month Unit Sales
June 90,000
July 120,000
August 210,000
September 150,000
October 180,000
November 120,000
There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.
Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds.
Required:
a. Prepare production budgets in units for July, August, and September.
b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.
Explanation / Answer
Royal Cool
Sales Budget
June- November
Particulars
June
July
August
September
October
November
Sales
90,000
120,000
210,000
150,000
180,000
120,000
Royal Cool
Production Budget
June- November
Particulars
June
July
August
September
October
November
Sales
90,000
120,000
210,000
150,000
180,000
120,000
Less: Beginning Stock
(30,000)
(24,000)
(42,000)
(30,000)
(36,000)
(24,000)
Add: Desired Ending Stock
24,000
42,000
30,000
36,000
24,000
-
Production Requirement
84,000
138,000
198,000
156,000
168,000
96,000
Royal Cool
Purchase Budget
June- November
Particulars
June
July
August
September
October
November
Production
84,000
138,000
198,000
156,000
168,000
96,000
Raw Material @ 5 Pounds
672,000
1,104,000
1,584,000
1,248,000
1,344,000
768,000
Less: Beginning Stock
(15,000)
(331,200)
(475,200)
(374,400)
(403,200)
(230,400)
Add: Desired Ending Stock
331,200
475,200
374,400
403,200
230,400
-
Purchase of Material
1,072,200
1,386,000
1,681,200
1,432,800
1,339,200
633,600
Cost @ $8
$ 8,577,600
$ 11,088,000
$ 13,449,600
$ 11,462,400
$ 10,713,600
$ 5,068,800
Royal Cool
Sales Budget
June- November
Particulars
June
July
August
September
October
November
Sales
90,000
120,000
210,000
150,000
180,000
120,000
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