Crest Products expects the following sales of its single product: Crest desires an ending finished goods inventory to be equal to 30% of the next month's sales needs. August 1 inventory is projected to be 7,800 units. Each finished unit requires 2 units of component X and 11 units of component Z. August 1 materials inventory includes 5,000 units of component X and 184,000 units of component Z. Crest desires to maintain a component X inventory equal to 10% of next month's production needs and a component Z inventory equal to 70% of next month's production needs.
a. Prepare a production budget for Crest for as many months as is possible.
b. Prepare a raw materials purchases budget for both Component X and Component Z for the months of August through October.

Question

Crest Products expects the following sales of its single product:  Crest desires an ending finished goods inventory to be equal to 30% of the next month's sales needs. August 1 inventory is projected to be 7,800 units. Each finished unit requires 2 units of component X and 11 units of component Z. August 1 materials inventory includes 5,000 units of component X and 184,000 units of component Z. Crest desires to maintain a component X inventory equal to 10% of next month's production needs and a component Z inventory equal to 70% of next month's production needs.
a. Prepare a production budget for Crest for as many months as is possible.
b. Prepare a raw materials purchases budget for both Component X and Component Z for the months of August through October.

Quizplus · Accepted Answer

The Answer of Crest Products expects the following sales of its single product:  Crest desires an ending finished goods inventory to be equal to 30% of the next month's sales needs. August 1 inventory is projected to be 7,800 units. Each finished unit requires 2 units of component X and 11 units of component Z. August 1 materials inventory includes 5,000 units of component X and 184,000 units of component Z. Crest desires to maintain a component X inventory equal to 10% of next month's production needs and a component Z inventory equal to 70% of next month's production needs.
a. Prepare a production budget for Crest for as many months as is possible.
b. Prepare a raw materials purchases budget for both Component X and Component Z for the months of August through October.

Crest Products Expects the Following Sales of Its Single Product