At the end of business on June 30, 2009, the Wooly Rug Company had 100,000 squar
ID: 2482845 • Letter: A
Question
At the end of business on June 30, 2009, the Wooly Rug Company had 100,000 square yards of rugs and 200,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:
The Wooly Rug Company wants to have sufficient square yards of finished product on hand at the end of each month to meet 40 percent of the following month's budgeted sales and sufficient pounds of raw materials to meet 30 percent of the following month's production requirements. Five pounds of raw materials are required to produce one square yard of carpeting.
Prepare a production budget for the months of July, August, and September and a purchases budget in units for the months of July and August.
Explanation / Answer
Solution:
Wooly Rug Company
Production Budget
For the Months of July, August, & September, 2009
July
August
September
Budgeted Sales (in sq. yards)
210,000
170,000
170,000
Add: Ending Inventory
68000
68000
68000
Less: Beginning Inventory
-100,000
-68000
-68000
Budgeted Production (in sq. yards)
178,000
170,000
170,000
Wooly Rug Company
Purchases Budget
For the Months of July & August, 2009
July
August
Budgeted Production (in sq. yard)
178,000
170,000
Pounds needed per sq. yard
5
5
Total Pounds required for production
890,000
850,000
Add: Ending Raw Material Inventory (Pounds)
255,000
255,000
Less: Beginning Inventory of Raw Material (Pounds)
-200,000
-255,000
Purchases in Pounds
945,000
850,000
Wooly Rug Company
Production Budget
For the Months of July, August, & September, 2009
July
August
September
Budgeted Sales (in sq. yards)
210,000
170,000
170,000
Add: Ending Inventory
68000
68000
68000
Less: Beginning Inventory
-100,000
-68000
-68000
Budgeted Production (in sq. yards)
178,000
170,000
170,000
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