A sales budget is given below for one of the products manufactured by the OMI Co.: The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI'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 a budget showing the required production each month for January, February, March, and April.
b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

Question

A sales budget is given below for one of the products manufactured by the OMI Co.:  The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI'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 a budget showing the required production each month for January, February, March, and April.
b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

Quizplus · Accepted Answer

The Answer of A sales budget is given below for one of the products manufactured by the OMI Co.:  The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI'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 a budget showing the required production each month for January, February, March, and April.
b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

A Sales Budget Is Given Below for One of the Products