Problem: Curiosity Corner sells books and various other reading-related products. One of the store's most popular reading-related products is a book pillow for hard cover and soft cover books. The pillows each sell for $8.00. Originally the pillows were handmade by a local artisan. The store's owner has been impressed with the demand for pillow and has recently begun a small manufacturing company to produce and distribute the pillow to other stores. Estimated sales for the quarter (in units are as follows:
October 6,500
November 7,200
December 9,600
Total 23,300
Each pillow requires 1/2 yard of fabric that costs, on average, $6 per yard.
Please assist with the following:
A. Prepare a sales budget for the fourth quarter based on the above information.
B. Prepare a production budget for the pillow manufacturing company. The company did not have any inventory of pillows at the end of September, but the company does want to maintain a 10 percent inventory at the end of each month based on the next month's estimated sales. January's sales are expected to be low, given the post-holiday trends, and are estimated to be 4,800 units.
C. Prepare a fabric purchases budget. The company did not have any inventory of fabric at the end of September, but the company does want to maintain a fabric inventory equal to 20percent of the next month's material needs. January's projected production is expected to be 4,820 units.