Dusty Company manufactures oak porch swings. Budgeted sales for the first four months of the year are as follows: Each porch swing requires 15 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of swings equal to 20 per cent of the following month's sales. At the beginning of the year, 40 swings are on hand.
Assume the company maintains an inventory of oak equal to 10 per cent of the next month's needs. At the beginning of the year, 500 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 400 square feet.
Required:
a.
Prepare a production budget, in units, for each of the first three months of the year.
b.
Prepare a purchases budget, in monetary values, for direct materials for each of the first three months of the year.

Question

Dusty Company manufactures oak porch swings. Budgeted sales for the first four months of the year are as follows:  Each porch swing requires 15 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of swings equal to 20 per cent of the following month's sales. At the beginning of the year, 40 swings are on hand.
Assume the company maintains an inventory of oak equal to 10 per cent of the next month's needs. At the beginning of the year, 500 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 400 square feet.
Required: 
a.
Prepare a production budget, in units, for each of the first three months of the year.
b.
Prepare a purchases budget, in monetary values, for direct materials for each of the first three months of the year.

Quizplus · Accepted Answer

The Answer of Dusty Company manufactures oak porch swings. Budgeted sales for the first four months of the year are as follows:  Each porch swing requires 15 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of swings equal to 20 per cent of the following month's sales. At the beginning of the year, 40 swings are on hand.
Assume the company maintains an inventory of oak equal to 10 per cent of the next month's needs. At the beginning of the year, 500 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 400 square feet.
Required: 
a.
Prepare a production budget, in units, for each of the first three months of the year.
b.
Prepare a purchases budget, in monetary values, for direct materials for each of the first three months of the year.

Dusty Company Manufactures Oak Porch Swings