Production and Purchases Budgets in Units At the end of business on June 30, 200

Question

Production and Purchases Budgets in Units
At the end of business on June 30, 2009, the Wooly Rug Company had 100,000 square yards of rugs and 500,000 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.

Month Sales July 180,000 sq. yards August 190,000 sq. yards September 150,000 sq. yards October 160,000 sq. yards

Explanation / Answer

Wooly Rug Company Purchase Budget   for the months July-Sep 2009 Details July August September Total October Required Production (sq yards)       156,000        174,000           154,000       484,000 Raw Material Required per sq yard rug                    5                     5                        5 Required Raw Materials for production       780,000        870,000           770,000 Add Closing Stock of Raw material Required       261,000        231,000                       -   Less Opeing Raw Materials in Hand    (500,000)     (261,000) Required Purchase of Raw Materials -lbs       541,000        840,000 1,381,000

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