The Outdoor Company makes and sells tents and backpacks. Both products are made of nylon and plastic. Each tent requires 15 yards of nylon and 3 pounds of plastic to produce, and each backpack uses 2 yards of nylon and 0.5 pounds of plastic. The company expects to sell the tents for $245 per unit and the backpacks for $180 per unit in the third quarter. It has compiled the following budgeted sales data (in units) to use in preparing its operating budget for the third quarter of 2020:

	tent	backpack
July	10400	14500
Aug	11200	13000

At the start of July, the company has 2,800 tents and 4,200 backpacks in its finished goods inventory, and 18,100 yards of nylon and 8,200 pounds of plastic in its direct materials inventory. The company uses FIFO for all its inventory. It paid $7.10 per yard for the nylon and $2.60 per pound for the plastic it had on hand at the start of July.

When making its third-quarter operating budget, The Outdoor Company plans each month to have 20% of each products unit sales in the following month in ending finished goods inventory. It also plans each month to have 10% of the direct materials used in production that month in ending direct materials inventory. It expects to pay $8.50 per yard for nylon and $4 per pound for plastic in the third quarter.

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Production in budget

DM usage

DM purchase

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