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 200,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:

July August

Purchases in pounds Answer Answer

Sales 210,000 sq.yards 70,000 sq. yards 170,000 sq. yards 170,000 sq. yards Month July September October 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. Wooly Rug Company Production Budget For the Months of July, August, & September, 2009 July August September Budgeted production - sq. yards Wooly Rug Company Purchases Budget

Explanation / Answer

closing stock for july=40 percent of following budgested month(august) sales=68000

budgeted production for july=sales +closing stock-opening stock

210000+68000-100000=178000 sq yards

simmilarly

purchases for july=production+closing stock-opening stock

178000+30percent of august production requirement-200000

now we will find out production of august

sales+closing stock -opening stock

170000+68000-68000(from july)=170000

production for september=170000+68000-68000=170000

purchases for july=178000+30 percent of 170000-200000=29000

purchases for august=170000+51000-51000=170000

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