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Question - A sales budget is given below for one of the food products (Food X) manufactured by the Key Food Company:
January 20,000 units
February 35,000
March 60,000
April 40,000
May 30,000
June 25,000
The inventory of finished goods at the end of each month must equal 20% of the next month's sales. On December 31, the finished goods inventory totaled 4,000 units.
Each unit of food product requires three strawberries. Since the delivery of these strawberries by Key'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 January 1 of the current year.
Required -
(a) Prepare production budget of the food
(b) Prepare budget showing the quantity of strawberries to be purchased each month for January, February, and March and in total for the quarter.
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