Reference no: EM132523172

Hightred Limited produces dog houses, each of which requires 25 metres of timber. The sales budget for the next four months is as follows:

                     May               June             July               August

Units               300             350                 400             450

Sales ($)          90000        105000              120000       135000

• 61% of accounts receivable are collected in the month of sale; 36% are collected in the following month and 3% are expected to go bad. A 2% discount is given to customers who pay within the month of sale.

• Raw materials (timber) inventory at the end of each month should be 46% of the following month's production requirements. 30% of the cost of raw materials purchases is paid in the month of purchase and the remainder is paid in the following month. The cost of timber is $6 per metre.

• Finished goods inventory at the end of each month should be 28% of the following month's sales requirements. At the beginning of May, the inventory is expected to be 150 units.

Prepare production and raw materials budgets and use them to answer the following questions:

Question 1: Calculate the number of dog houses that need to be produced in June

Question 2: Calculate the number of dog houses that need to be produced in July.

Question 3: Calculate the required inventory of timber in metres at the end of May.

Question 4: Calculate the required inventory of timber in metres at the end of June.

Question 5: Calculate the amount of timber in metres expected to be used for production in May.

Question 6: Calculate the amount of timber in metres expected to be used for production in June.

Question 7: Calculate the required amount of timber in metres that must be purchased in May.

Question 8: Calculate the required amount of timber in metres that must be purchased in June.