Smithson Ltd. has the following budgeted sales for the selected six-month period:
There were 7,500 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month.
Three pounds of materials are required for each unit produced. Each pound of material costs £20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on June 1 was 5,000 pounds.
Required:

a.
Prepare production budgets in units for July, August, and September.
b.
Prepare a purchases budget in pounds and dollars for July, August, and September.

Question

Smithson Ltd. has the following budgeted sales for the selected six-month period:
There were 7,500 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month.
Three pounds of materials are required for each unit produced. Each pound of material costs £20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on June 1 was 5,000 pounds.
Required:
  
a.
Prepare production budgets in units for July, August, and September.
b.
Prepare a purchases budget in pounds and dollars for July, August, and September.

Quizplus · Accepted Answer

The Answer of Smithson Ltd. has the following budgeted sales for the selected six-month period:
There were 7,500 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month.
Three pounds of materials are required for each unit produced. Each pound of material costs £20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on June 1 was 5,000 pounds.
Required:
  
a.
Prepare production budgets in units for July, August, and September.
b.
Prepare a purchases budget in pounds and dollars for July, August, and September.