Pillows Unlimited makes decorative throw pillows for home use. The company sells the pillows to home dcor
Question:
Pillows Unlimited makes decorative throw pillows for home use. The company sells the pillows to home décor retailers for \($14\) per pillow. Each pillow requires 1.25 yards of fabric, which the company obtains at a cost of \($6\) per yard. The company would like to maintain an ending stock of fabric equal to 10% of the next month’s production requirements. The company would also like to maintain an ending stock of finished pillows equal to 20% of the next month’s sales.
Sales (in units) are projected to be as follows for the first three months of the year:
Requirements:
Prepare the following budgets for the first three months of the year as well as a summary budget for the quarter:
1. Prepare the sales budget, including a separate section that details the type of sales made. For this section, assume that 10% of the company’s pillows are cash sales, while the remaining 90% are sold on credit terms.
2. Prepare the production budget. Assume that the company anticipates selling 120,000 units in April.
3. Prepare the direct materials budget. Assume the company needs 150,000 yards of fabric for production in April.
Step by Step Answer:
