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O’Reilly Outfitters Inc. has forecasted sales of 32,000 tents for the upcoming y

ID: 2575110 • Letter: O

Question

O’Reilly Outfitters Inc. has forecasted sales of 32,000 tents for the upcoming year. The anticipated finished goods inventory at January 1 is 5,000 units, but management desires this inventory level to be reduced by 20% on December 31.

Two materials are used in the production of tents: 36 square yards of nylon having a standard cost of $2.00 per yard, and 20 feet of metal tubing having a standard cost of $.50 per linear foot. Raw material inventory information is as follows:

Estimated inventory January 1

Desired inventory December 31

Nylon

110,000 yds.

80,000 yds.

Metal tubing

45,000 ft.  

35,000 ft.  

(1)   Prepare a production budget for the upcoming year.

(2)   Prepare a direct materials budget for the upcoming year.

Estimated inventory January 1

Desired inventory December 31

Nylon

110,000 yds.

80,000 yds.

Metal tubing

45,000 ft.  

35,000 ft.  

Explanation / Answer

a) Production budget :

(2)   Prepare a direct materials budget for the upcoming year.

Production budget Sales 32000 Add: Desired ending inventory 4000 Total needs 36000 Less: Beginning inventory (5000) Production unit 31000