Production and Purchases Budgets At the beginning of October, Comfy Cushions had

Question

Production and Purchases Budgets At the beginning of October, Comfy Cushions had 2,600 cushions and 15,500 pounds of raw materials on hand. Budgeted sales for the next three months are: Month October 13,000 cushions November 15,000 cushions December 18,000 cushions Sales Comfy Cushions wants to have sufficient raw materials on hand at the end of each month to meet 25 percent of the following month's production requirements and sufficient cushions on hand at the end of each month to meet 20 percent of the following month's budgeted sales. Five pounds of raw materials, at a standard cost of 50.90 per pound, are required to produce each cushion.

Explanation / Answer

Purchase Budget October November Production requirement 13400*5 =67000 15600*5=78000 Desired ending inventory 19500       [78000*.25] Raw material requirement 86500 Less:Beginning inventory (15500) Purchase requirement 71000 Purchase requirement (in$) 63900      [71000*.90]

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