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Question - A sales budget is given below for one of the products manufactured by the Quick Production Limited:
July 25,000 units
August 40,000 units
September 65,000 units
October 45,000 units
November 35,000 units
December 30,000 units
The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on June 30 the finished goods inventory totalled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this specialized material by Quick's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on July 1 of the current year.
Required - Prepare a budget showing the quantity of material to be purchased each month for July, August and September and in total for the quarter.
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