Question

At the beginning of October, Comfy Cushions had 2,200 cushions and 13,500 pounds of raw materials on hand. The budgeted sales for the next three months are as follows: October - 11,000 cushions, November - 13,000 cushions, December - 16,000 cushions. Comfy Cushions wants to have sufficient raw materials on hand at the end of each month to meet 25 percent of the following month's production requirements and sufficient cushions on hand at the end of each month to meet 20 percent of the following month's budgeted sales. It takes five pounds of raw materials, at a standard cost of $0.90 per pound, to produce each cushion.

a. Prepare a production budget for October and November. Do not use a negative sign with your answers.

Comfy Cushions Production Budget for the Months of October and November:

October:
Unit Sales: 11,000 cushions
Desired Ending Inventory: _______
Finished Goods Requirements: _______
Less Beginning Inventory: _______
Production Requirements: _______

November:
Unit Sales: 13,000 cushions
Desired Ending Inventory: _______
Finished Goods Requirements: _______
Less Beginning Inventory: _______
Production Requirements: _______

b. Prepare a purchases budget in units and dollars for October. Do not use a negative sign with your answers.

Comfy Cushions Purchases Budget for the Month of October:

October:
Units: _______
Dollars: _______

Answer 1

Comfy Cushions requires the production of 11,400 cushions in October and 13,600 cushions in November. For October, the company needs to purchase 60,500 pounds of raw materials at a total cost of $54,450.

Step-by-step explanation:

To prepare a production budget for Comfy Cushions for the months of October and November, we need to calculate the required production levels considering the desired ending inventory and begin with the inventory level amounts provided.

October Production Budget

Unit Sales: 11,000 cushions

Desired Ending Inventory: 20% of November sales = 20% of 13,000 = 2,600 cushions

Finished Goods Requirements: Unit Sales + Desired Ending Inventory = 11,000 + 2,600 = 13,600 cushions

Less Beginning Inventory: 2,200 cushions

Production Requirements: Finished Goods Requirements - Beginning Inventory = 13,600 - 2,200 = 11,400 cushions

November Production Budget

Unit Sales: 13,000 cushions

Desired Ending Inventory: 20% of December sales = 20% of 16,000 = 3,200 cushions

Finished Goods Requirements: Unit Sales + Desired Ending Inventory = 13,000 + 3,200 = 16,200 cushions

Less Beginning Inventory: Desired Ending Inventory of October = 2,600 cushions

Production Requirements: Finished Goods Requirements - Beginning Inventory = 16,200 - 2,600 = 13,600 cushions

To prepare a purchases budget in units and dollars for the month of October, we need to calculate the raw materials needed for production and the associated costs.

October Purchases Budget

Units: For the production of 11,400 cushions, each requiring 5 pounds of material = 11,400 * 5 = 57,000 pounds.

Desired Ending Inventory of raw materials: To meet 25% of the following month's production requirements = 25% of (5 * 13,600) = 17,000 pounds

Total Material Requirements

Less Beginning Inventory: 13,500 pounds

Purchases (in units): Total Requirement - Beginning Inventory = (57,000 + 17,000) - 13,500 = 60,500 pounds

Cost per Pound: $0.90

Purchases (in dollars): Purchases in units * Cost per Pound = 60,500 * $0.90 = $54,450