Question

*73) Lubriderm Corporation has the following budgeted unit sales for the next six-month period:*

Month Unit Sales
June 90,000
July 120,000
August 210,000
September 150,000
October 180,000
November 120,000

There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.

Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds.

Required:
a. Prepare production budgets in units for July, August, and September.
b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.

Answer 1

To prepare the production budget, calculate the desired ending inventory and units to be produced. For the purchases budget, calculate the pounds of material required and consider desired ending and starting inventory.

Step-by-step explanation:

To prepare the production budget, we need to calculate the desired ending inventory and the units to be produced. The desired ending inventory is 20% of the unit sales for the next month. Based on this, we can calculate the required production units.

For the purchases budget, we need to calculate the pounds of material required for each month. The pounds of material required can be obtained by multiplying the units to be produced by the material requirement per unit. The purchases budget can then be calculated by considering the desired ending inventory and the starting inventory for materials.