Production and Purchases Budgets in Units At the end of business on June 30, 201
ID: 2564432 • Letter: P
Question
Production and Purchases Budgets in Units
At the end of business on June 30, 2017, the PE Rug Company had 150,000 square yards of rugs and 650,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2017 are:
The PE 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 260,000 sq. yards August 230,000 sq. yards September 190,000 sq. yards October 210,000 sq. yardsExplanation / Answer
Answer
July
August
September
October
A
Sales in Units
260000
230000
190000
210000
B=Next month's 'A' x 40%
Ending inventory required
92000
76000
84000
0
C=A+B
Total requirement
352000
306000
274000
210000
D=B of last month
Opening Stock
150000
92000
76000
84000
E=C-D
Budgeted Productions in Sq. Yards
202000
214000
198000
126000
Working
July
August
September
October
A
Budgeted Productions (Units)
202000
214000
198000
126000
B
Raw Material required per unit
5
5
5
5
C=AxB
Total Raw material required
1010000
1070000
990000
630000
D=30% of next month's 'C'
Ending inventory
321000
297000
189000
0
E=C+D
Total requirement
1331000
1367000
1179000
630000
F='D' of last month
Opening Inventory
650000
321000
297000
189000
G=E-F
Raw material (pounds) to be purchased
681000
1046000
882000
441000
July
August
September
October
A
Sales in Units
260000
230000
190000
210000
B=Next month's 'A' x 40%
Ending inventory required
92000
76000
84000
0
C=A+B
Total requirement
352000
306000
274000
210000
D=B of last month
Opening Stock
150000
92000
76000
84000
E=C-D
Budgeted Productions in Sq. Yards
202000
214000
198000
126000
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