Problem - 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 400,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:
|
Month
|
Sales
|
|
July
|
200,000 sq. yards
|
|
August
|
180,000 sq. yards
|
|
September
|
150,000 sq. yards
|
|
October
|
160,000 sq. yards
|
The Wooly Rug Companhy 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.