Production and Purchases Budgets in Units At the end of business on June 30, 201
ID: 2498663 • Letter: P
Question
Production and Purchases Budgets in Units
At the end of business on June 30, 2014, the Wooly Rug Company had 100,000 square yards of rugs and 400,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2014 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.
Month Sales July 210,000 sq. yards August 180,000 sq. yards September 140,000 sq. yards October 160,000 sq. yardsExplanation / Answer
Statement showing computations for production Budget Particulars July August September October Sales 210,000.00 180,000.00 140,000.00 160,000.00 Closing Inventory @40% of next month Sales 72,000.00 56,000.00 64,000.00 Opening inventory = Closing invof prev month 100,000.00 72,000.00 56,000.00 Production in Sq Yards = Sales+Closing - Opening 182,000.00 164,000.00 148,000.00 Pounds Required for prod'n @5 910,000.00 820,000.00 740,000.00 Closing Raw Materials @30% 246,000.00 222,000.00 Opening Raw Materials 400,000.00 246,000.00 Purchases in Pounds= Prod'n+Closing-Opening 756,000.00 796,000.00
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