The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows: Each rocking chair requires 10 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of chairs equal to 25 per cent of the following month's sales. At the beginning of the year, 40 chairs 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, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet.
Required:
a.
Prepare a production budget, in units, for each of the first four months of the year.
b.
Prepare a purchases budget, in dollars, for each of the first three months of the year.

Question

The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows:  Each rocking chair requires 10 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of chairs equal to 25 per cent of the following month's sales. At the beginning of the year, 40 chairs 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, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet.
Required: 
a.
Prepare a production budget, in units, for each of the first four months of the year.
b.
Prepare a purchases budget, in dollars, for each of the first three months of the year.

Quizplus · Accepted Answer

The Answer of The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows:  Each rocking chair requires 10 square feet of oak, at a cost of £20 per square foot.
The company wants to maintain an inventory of chairs equal to 25 per cent of the following month's sales. At the beginning of the year, 40 chairs 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, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet.
Required: 
a.
Prepare a production budget, in units, for each of the first four months of the year.
b.
Prepare a purchases budget, in dollars, for each of the first three months of the year.

The Good as Old Company Manufactures Antique-Looking, Oak Rocking Chairs