Question

Denton Company

Denton Company manufactures three products (A, B, and C) from three raw materials (X, Y, and Z). The following table indicates the number of pounds of each material that is required to manufacture each type of product:

Product	Material X	Material Y	Material Z
A	2	3	2
B	2	1	2
C	3	2	2

The company has a policy of maintaining an inventory of finished goods on all three products equal to 25 percent of the next month's budgeted sales. Listed below is the sales budget for the first quarter of the current year:

Month	Product A	Product B	Product C
Jan.	10,000	11,000	12,000
Feb.	9,000	12,000	8,000
Mar.	11,000	10,000	10,000

Refer to Denton Company. Assuming that the company meets its required inventory policy, prepare a production budget for the first 2 months of the current year for each of the three products.

Answer 1

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Production Budget:		Product A			Product B			Product C
		Jan	Feb		Jan	Feb		Jan	Feb
Budgeted Sale		10000	9000		11000	12000		12000	8000
Add: Deisred ending inventory	25% of Next Month	2250	2750		3000	2500		2000	2500
Total Needs		12250	11750		14000	14500		14000	10500
Less: Beginning Inventory	25% of Same Month	-2500	-2250		-2750	-3000		-3000	-2000
Budgeted Production		9750	9500		11250	11500		11000	8500