A sales budget is given below for one of the products manufactured by the Key Company:
The inventory of finished goods at the end of each month should 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 specialized electrical switches. Since the production of these specialized switches 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 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 Key Company:

The inventory of finished goods at the end of each month should 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 specialized electrical switches. Since the production of these specialized switches 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 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.

Jordan Curtis · Accepted Answer

Final Answer : a.The company's production budget is as follows:  b.The materials purchase budget (based on the above production budget) would be as follows:

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