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Question - Alvarez Company produces various parts used in the automotive industry. The sales budget for the first eight months of 2012 shows the following projections:
Month
Units
January
25,000
May
31,400
February
27,000
June
34,500
March
32,000
July
36,700
April
28,500
August
35,000
Inventory on December 31 of the previous year was budgeted at 6,250 units. The desired quantity of finished-goods inventory at the end of each month in 2012 is to be equal to 25 percent of the next month's budgeted unit sales. Each unit of finished product requires three pounds of raw material. The company wants to have 30 percent of next month's required raw materials on hand at the end of each month.
Required -
A. Prepare a production budget for January through June of 2012.
B. Prepare a material purchases budget for the same period, assuming that each pound of raw material costs $22.
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