Describe the production budget that you prepared

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Reference no: EM1311410

Prepare the Production Budget and direct Materials purchase Budget For the quarter from the data given below.

Production and Direct Materials Budgets
Tongo Toys manufactures and distributes a number of products to retailers. One of these products, Playclay, requires three pounds of materials A135 in the manufacture of each unit. The company is now planning raw materials needs for the third quarter-July, August, and September. Peak sales of Playclay occur in the third quarter of each year. Top keep production and shipments moving smoothly, the company has the following requirements:
a. The finished goods inventory on hand at the end of each month must be equal to 5,000 units plus 30% of the next month's sales. The finished goods inventory on June 30 is budgeted to be 17,000 units.
b. The raw materials inventory on hand at the end of each month must be equal to one-half of the following month's production needs for raw materials. The raw materials inventory on June 30 for material A35 is budgeted to be 64,500 units.
c. The company maintains no work in process inventories.
A Sales budget for Playclay for the last six months of the year follows.

	Budgeted Sales in Units
July.......	40,000
August.......	50,000
September.......	70,000
October.......	35,000
November.......	20,000
December.......	10,000

Examine the production budget that you prepared. why will the company produce more units than it sells in July and August and less units than it sells in September and October?

Reference no: EM1311410

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