Part B Albatross Workwear Clothing Ltd produces and distributes Workwear in Aust

Question

Part B Albatross Workwear Clothing Ltd produces and distributes Workwear in Australia with a selling price of $25. The company is now preparing its budget for July to August 2017. In making the clothes (Finished Goods), it needs 2 metres of direct materials. In keeping production and sales moving smoothly, the company has the following requirements The finished goods inventory on hand at the end of each month must be equal to 5,000 units of clothes plus 20% of the next month's sales. The finished goods inventory on 30 June 2017 is budgeted to be 12,000 units. The direct materials inventory on hand at the end of each month must be equal to 40% of the following month's production needs for direct materials. The direct materials inventory on 30 June 2017 is budgeted to be 54,000 metres. Budgeted purchase price of Direct Materials is $8 per metre I. ll. II. The company maintains no work in process inventories. The company's projected sales for the last six months of the year follows: Month Units Jul August September October November December 45,000 50,000 50,000 60,000 65,000 60,000 Required: Prepare the following budgets for the period from July to August 2017 (show your working) (a) (b) (c) (d) Sales budgets in units and dollars. Production budgets in units Direct material usage budgets in metres. Direct material purchase budgets in dollars and metres 6 marks 6 marks 6 marks 12 marks

Explanation / Answer

(a)

(b)

(c)

(d)

Albatross Workwear Clothing Ltd. Sales Budget For the Months July to August 2017 July August Total Projected unit sales 45000 50000 95000 Unit selling price $ 25 25 25 Total sales $ 1125000 1250000 2375000

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