A company produces two products, A1 and A2 that are sold to retailers.
The budgeted sales volumes for the next quarter are as follows:
Product A1 Units 32,000
Product A2 Units 56,000
The inventory of finished goods is budgeted to increase by 1,000 units of A1 and decrease by 2,000 units of A2 by the end of the quarter. Materials B3 and B4 are used in the production of both products. The quantities required of each material to produce one unit of the finished product and the purchase price are shown in the table below:
A1 B3 8 kg B4 4 kg
A2 B3 4 kg B4 3 kg
Purchase price per kg B3 £1.25 B4 £1.80
Budgeted operating inventory B3 30,000 kg B4 20,000 kg
The company plans to hold inventory of raw materials, at the end of the quarter, of 5 per cent of the quarter’s materials usage budget.
Required:
Prepare the following budgets for the quarter:
(i) The production budget (in units)
(ii) The material usages budget (in kg)
(iii) The material purchases budget (in kg and £)
