Question
Below is the estimated sales in units for Alan Shearer Company for the next six quarters: Quarter Estimated sales in units Q1 2,000 Q2 5,000
Below is the estimated sales in units for Alan Shearer Company for the next six quarters:
Quarter | Estimated sales in units |
Q1 | 2,000 |
Q2 | 5,000 |
Q3 | 4,000 |
Q4 | 1,000 |
Q5 | 2,500 |
Q6 | 6,000 |
Production policy requires:
1. Closing inventory to equal 25% of the following quarter's sales
2. Each unit produced requires 2 kg of raw materials.
3. The purchase price of 1 kg of raw materials is $3
4. The purchase price of the raw materials increases by 5% at the beginning of the second quarter
5. Closing raw materials inventor to equal to 10% of the next quarter's production needs.
6. At the beginning of the first quarter both finished goods and raw materials inventory balances are expected to be at the required policy.
Required.
1. Prepare the production budget in units and in dollars on a quarterly basis for the first four quarters.
2. Prepare the raw materials purchases budget in units and in dollars on a quarterly basis for the first four quarters.
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