Reference no: EM132855796
Question - Palm Pals Inc. manufactures toy stuffed animals. The company makes several types of stuffed toys. One of these toys, stuffed lion, requires three pounds of material 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 the toy occur in the third quarter of each year. To keep production and shipments moving smoothly, the company has the following inventory 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 is budgeted to be 64,500 pounds.
c. The price of the material is $3 per pound.
A sales budget for the stuffed toy 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
Required -
1. Make a production budget for the months July, August, September, and October.
2. Make a direct materials budget to be purchased for July, August, and September and for the quarter in total.