Clingy Company budgeted the following unit sales: January 14,000, February 12,00

Question

Clingy Company budgeted the following unit sales: January 14,000, February 12,000, March 11,000, April 16,000, May 13,000. Each unit requires 2 yards of fabric which is estimated to cost $3.50 per yard. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 20% of next month's anticipated sales. Clingy Company also have a policy of maintaining a raw materials inventory at the end of each month equal to 10% of the yards needed for the following month's production. There were 1,200 yards of fabric on hand at March 1. Instructions: Prepare a production budget and a direct materials budget for March.

Explanation / Answer

Production Budget for March

Direct Materials Budget for March

February March April Opening Balance 2400 2200 3200 Add: Production (balancing figure) 11800 12000 15400 Total units for sales 14200 14200 18600 Less: Sales 12000 11000 16000 Closing Stock 2200 3200 2600

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