Question

Pillows Ltd.Pillows Ltd.

makes decorative throw pillows for home use. The company sells the pillows to home? décor retailers for

$ 20$20

per pillow. Each pillow requires

1.101.10

yards of? fabric, which the company obtains at a cost of

$ 9$9

per yard. The company would like to maintain an ending stock of fabric equal to

1010?%

of the next? month's production requirements. The company would also like to maintain an ending stock of finished pillows equal to

2525?%

of the next? month's sales. Sales? (in units) are projected to be as follows for the first three months of the? year:

January. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

180,000

February. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200,000

March. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

215,000

Prepare the following budgets for the first three months of the? year, as well as a summary budget for the? quarter:

1.	Prepare the sales? budget, including a separate section that details the type of sales made. For this? section, assume that 1010?% of the? company's pillows are cash? sales, and the remaining 9090?% are sold on credit terms.
2.	Prepare the production budget. Assume that the company anticipates selling 220 comma 000220,000 units in April.
3.	Prepare the direct materials purchases budget. Assume the company needs 240 comma 000240,000 yards of fabric for production in April.

Answer 1

SALES BUDGET
			Jan	Feb	March	QUARTER
Budgeted Sales units			180,000	200,000	215,000	595,000
Cash sales units			18,000	20,000	21,500	59,500
Credit sales unitd			162,000	180,000	193,500	535,500
Selling price per unit			20	20	20	20
Budgeted Cas sales			360,000	400,000	430,000	1,190,000
Budgeted credit sales			3240000	3600000	3870000	10710000
Total Sales			3,600,000	4,000,000	4,300,000	11,900,000
PRODUCTION BUDGET
			Jan	Febb	March	QUARTER
Budgeted Sales Units			180,000	200,000	215,000	595,000
Add: Desired Ending Finished inventory			50,000	53,750	55,000	55,000
Total Needs			230,000	253,750	270,000	650,000
Less: Beginning Finished Inventory			45,000	50,000	53,750	45,000
Required Production in units			185,000	203,750	216,250	605,000
RAW MATERIAL PURCHASE BUDGET
			Jan	Feb	March	QUARTER
Budgeted Production units			185,000	203,750	216,250	605,000
Raw material needed per unit			1.10	1.10	1.10	1.10
Total productioj requiremnet			203,500	224,125	237,875	665,500
Add: Desired Ending Inventory			22,413	23,788	24,000	24,000
Total needs			225,913	247,913	261,875	689,500
Less: Beginning Inventory			20,350	22,413	23,788	20,350
Purchase Units			205,563	225,500	238,087	669,150
Cost price per unit			9.00	9.00	9.00	9.00
Budgeted Purchase in $			1,850,067	2,029,500	2,142,783	6,022,350