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.)


Production Budget

For the Two Months Ending February 28, 2011

January February


Unit Sales

Add:Desired Ending Finished Goods Inv.

Total Required Units

Less: Beginning Finished Good Inv.

Required Production Units


Direct Material Budget

For the month ending January 2011


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


Direct Materials Purchases

Cost per Pound

Total Cost of Direct Materials Purchases