Troy Corporation has the following budgeted sales for the selected four-month period: Month Unit Sales October...

Troy Corporation has the following budgeted sales for the selected four-month period:

Month	Unit Sales
October	40,000
November	70,000
December	50,000
January	60,000

There were 14,000 units of finished goods in inventory at the beginning of October. Plans are to have an inventory of finished product equal to 25 percent of the unit sales for the next month.

Five pounds of a single raw material are required for each unit produced. Each pound of material costs $10. Plans are to have inventory levels for materials equal to 30 percent of the amount of materials needed to satisfy next month's production and 84,000 units of raw material on hand at the end of December. Materials inventory on October 1 was 60,000 pounds

A. Prepare a production budget in units for October, November, and December.

b. Prepare a purchase budget in pounds and dollars for October, November, and December.

Expert Solution

A. Production Budger

Production Budget	October	November	December
Opening Stock	14000	17500	12500
Add Production (Sales + Closing Stock-Opening Stock	43500	65000	52500

Less: Closing Stock (25% of next month sales)	17500	12500	15000
Sales of Finish Goods	40000	70000	50000

B. Purchase Budget

i. Closing Stock is equal to 30% of the amount of material needed to satisfy the next months production

a. Production for the month of November is 65,000 units. Hence Material required to produe the finished goods is equal to 65,000*5 pounds = 3,25,000 pounds closing stock of raw material for the month of october is 30% of 3,25,000 pounds = 97,500 Pounds similarly the closing stock of raw material inventory is to be determined.

Purchase budget

Particulars	October	November
Opening Stock	60000	97500
Consumption (Production * 5Pounds)	217500	325000

Less: Closing Stock	97500	78750

jeff jeffy answered 1 year ago

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