Prepare a production budget and a direct materials budget

Michigan Mills, Inc. prepared the following figures as a basis for its annual budget:

Required

Estimated Sales Materials per Unit

Product Expected Sales Price per Unit Rayon Cotton

Socks.................................. 50,000 units $5 4 lbs. 2 lbs.

Shirts.................................. 25,000 8 5 lbs.

Handkerchiefs.................... 75,000 3 3 lbs.

Estimated inventories at the beginning and desired quantities at the end of the year are:

Purchase Price

Material Beginning Ending per Pound

Rayon................................. 6,000 lbs. 7,500 lbs. $.75

Cotton................................. 5,000 6,000 .50

Product Beginning Ending

Socks.................................. 3,000 units 2,500 units

Shirts.................................. 1,000 2,000

Hand22) kerchiefs.................... 4,000 5,000

Instructions:

1. Prepare the production budget.

Socks Shirts Handkerchiefs

Units required to meet sales budget........

Add desired ending inventories..............

Total units required.............................

Less estimated beginning inventories......

Planned production.............................

2. Prepare the direct materials budget.

Rayon Cotton

Socks............................................................................

Shirts............................................................................

Handkerchiefs..............................................................

Total.........................................................................

Add desired ending inventories....................................

Total.........................................................................

Less estimated beginning inventories............................

Budgeted quantities of materials purchases..................

Budgeted purchase price per pound..............................

Budgeted dollar amounts of materials purchases.......... $ $