3. 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 600,000 pounds of raw materials on hand. Budgeted sales for the third quarter of 2009 are:

Month	Sales
July	180,000 sq. yards
August	200,000 sq. yards
September	170,000 sq. yards
October	180,000 sq. yards

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 For the Months of July & August, 2009
	July	August
Purchases in pounds

5. Cash Disbursements Assume that Waycross Manufacturing manages its cash flow from its home office. Waycross controls cash disbursements by category and month. In setting its budget for the next six months, beginning in July, it used the following managerial guidelines:

Category	Guidelines
Purchases	Pay half in current and half in following month.
Payroll	Pay 90 percent in current month and 10 percent in following month.
Loan Payments	Pay total amount due each month.

Predicted activity for selected months follow:

Category	May	June	July	August
Purchases	$30,000	$48,000	$52,000	$54,000
Payroll	100,000	130,000	140,000	100,000
Loan Payments	10,000	10,000	12,000	12,000

Prepare a schedule showing cash disbursements by account for July and August.

Waycross Manufacturing Schedule of Cash Disbursements For the Months of July and August
	July	August
Accounts payable
Payroll
Loan payments
Total