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A Company has budgeted the following unit sales:
2020 Units
January 10,000
February 8,000
March 9,000
April 11,000
May 15,000
On December 31, 2019 the finished goods units on hand were 2,000 units. Each unit requires 3 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 20% of next month's anticipated sales.
They also have a policy of maintaining a raw materials inventory at the end of each month equal to 30% of the pounds needed for the following month's production. There were 8,640 pounds of raw materials on hand at December 31, 2019.
Required
Problem a: For the first quarter of 2020, prepare
1) a production budget and
2) a direct materials budget.
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