(a) Prepare the production budget, in terms of the number of sweaters without logo, for the months August, September, October and the quarter as a whole. Clearly show the opening inventory, sales, closing inventory and production. (12 marks) (b) Prepare the purchase budgets in respect of the materials used for August, September, October and the quarter as a whole. For each of the materials clearly show the opening inventory, production and closing inventory in units of materials and show the purchases in terms of both units and s. (18 marks) (c) Is the company using a push or pull-system at the moment? Explain both systems and explain how the company can change from the current to the alternative system. (12 marks) (d) Comment on the current inventory policy. What problems do you foresee? (8 marks) (Total marks for question 3: 50 marks) Uni Merch plc manufactures and sells merchandising for Universities. Their best-selling product is a sweater that can be customised with any University logo. The company purchases materials in bulk to benefit from discounts and produces basic sweaters in bulk. Once a University places an order the basic product gets dyed and a logo is printed on to the sweater. To produce one sweater you need on average 2 square metres of fabric, 3 metres of thread, and 0.2 litres of fabric dye. The cost for a square metre of fabric is 8, for a metre of thread is 2, and for a litre of dye the cost is 15. To receive a discount the company needs to purchase 1000 square metres of fabric, 5000 metres of thread and 200 litres of dye, so the company purchases these amounts each month to receive 10% off each item. The expected demand for sweaters in the coming 5 months is given below: Opening inventory for June is provided below: Since the company produces in bulk, the company will always use the full machine capacity to produce. Production capacity for the coming 5 months is provided below. (a) Prepare the production budget, in terms of the number of sweaters without logo, for the months August, September, October and the quarter as a whole. Clearly show the opening inventory, sales, closing inventory and production. (12 marks) (b) Prepare the purchase budgets in respect of the materials used for August, September, October and the quarter as a whole. For each of the materials clearly show the opening inventory, production and closing inventory in units of materials and show the purchases in terms of both units and s. (18 marks) (c) Is the company using a push or pull-system at the moment? Explain both systems and explain how the company can change from the current to the alternative system. (12 marks) (d) Comment on the current inventory policy. What problems do you foresee? (8 marks) (Total marks for question 3: 50 marks) Uni Merch plc manufactures and sells merchandising for Universities. Their best-selling product is a sweater that can be customised with any University logo. The company purchases materials in bulk to benefit from discounts and produces basic sweaters in bulk. Once a University places an order the basic product gets dyed and a logo is printed on to the sweater. To produce one sweater you need on average 2 square metres of fabric, 3 metres of thread, and 0.2 litres of fabric dye. The cost for a square metre of fabric is 8, for a metre of thread is 2, and for a litre of dye the cost is 15. To receive a discount the company needs to purchase 1000 square metres of fabric, 5000 metres of thread and 200 litres of dye, so the company purchases these amounts each month to receive 10% off each item. The expected demand for sweaters in the coming 5 months is given below: Opening inventory for June is provided below: Since the company produces in bulk, the company will always use the full machine capacity to produce. Production capacity for the coming 5 months is provided below
