7-5

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	220,000 sq. yards
August	160,000 sq. yards
September	150,000 sq. yards
October	160,000 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	Answer	Answer	Answer

Wooly Rug Company Purchases Budget For the Months of July & August, 2009
	July	August
Purchases in pounds	Answer	Answer