Model 5: Production and purchase budgets
The following are the estimates of a company for 8 months ending 31 December 2009:
|
Month |
Estimated Sales (Units) |
|
|
April 2009 |
8,000 |
|
|
May 2009 |
10,000 |
|
|
June 2009 |
12,000 |
|
|
July 2009 |
8,000 |
|
|
August 2009 |
7,000 |
|
|
September 2009 |
10,000 |
|
|
October 2009 |
13,000 |
|
|
November 2009 |
15,000 |
As a matter of policy, the company maintains the closing balance of finished goods and raw materials as follows:
|
Stock item |
Closing balance of months |
|
Finished goods |
50% of the estimated sales for the next months. |
|
Raw materials |
Estimated consumption for the next month. |
Every unit of production requires 2 kg of raw material costing Rs. 10 per kg.
You are required to prepare (a) production budget (in units) and (b) raw-material-purchase budget (in units and cost) of the company for the period ending 30 September 2009.