Ortiz Company’s sales budget projects unit sales of part 198Z of 11,100 units in January, 11,900 units in February and 12,600 units in March. Each unit of part 198Z requires 2 pounds of materials, which cost $6 per pound. Ortiz Company desires its ending raw materials inventory to equal 50% of the next month’s production requirements, and its ending finished goods inventory to equal 30% of the next month’s expected unit sales. These goals were met at December 31, 2010.
Prepare a production budget for January and February 2011. (Enter all amounts as positive amounts and subtract where necessary.)
ORTIZ COMPANY
Production Budget
For the Two Months Ending February 28, 2011
January February
Expected
Unit Sales
Add:Desired Ending Finished Goods Inv.
Total Required Units
Less: Beginning Finished Good Inv.
Required Production Units
Ortiz COMPANY
Direct Material Budget
For the month ending January 2011
January
Units to be Produced
Direct Materials Pounds per Unit
Total Pounds needed for Production
Add: Desired Pounds in Ending Direct
Material Inv.
Total Material Required
Less: Beginning Direct Materials
(Pounds)
Direct Materials Purchases
Cost per Pound
Total Cost of Direct Materials Purchases