Compute material budget and production budget.
The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows:
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Budgeted Sales (Units)
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January
|
200
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February
|
240
|
|
March
|
180
|
|
April
|
160
|
|
May
|
240
|
Each rocking chair requires 10 square feet of oak, at a cost of $20 per square foot.
The company wants to maintain an inventory of chairs equal to 25 percent of the following month's sales. At the beginning of the year, 40 chairs are on hand.
The company wants to maintain an inventory of chairs equal to 25 percent of the following month's sales. At the beginning of the year, 40 chairs are on hand.
Required:
a. Prepare a production budget, in units, for each of the first four months of the year.
b. Prepare a direct materials budget, in dollars, for each of the first three months of the year.