Question

Shown below are the expected unit sales for Jacks Company for the first quarter of 2018.

-----January February March

Sales 1,500 2,000 3,000

In addition, expected sales in April and May are 4,000 and 5,000 units, respectively. They have a policy of maintaining a level of ending units sufficient to meet 90% of their sales demand for the following month.
Each finished unit requires four pounds of direct materials. At the beginning of 2018, they had 6,000 pounds of direct materials on hand. They desire ending materials for each month sufficient to meet the following month's production demands. Each pound of direct materials costs $2.

a. Prepare the production budget for the first quarter of 2018.

b. Prepare the purchases budget for the first quarter of 2018.

Answer 1

Production budget

	January	February	march
Sales	1500	2000	3000
Add: closing inventory	1800	2700	3600
Total	3300	4700	6600
Less: opening inventory	1500	1800	2700
Production	1800	2900	3900

*Opening inventory for january is 6000 pounds divided by 4 = 1500.

*The closing inventory of each month is opening inventory of next month.

2.

Purchase budget

Production for january= 1800 units x 4 x 2 = 14400

Prodection for February= 2900 units x 4 x 2 = 23200

Prodection for March = 3900 units x 4 x 2 = 31200

Total= 68800