Alvarez Company produces various parts used in the automotive industry.

timer Asked: Dec 14th, 2014

Question description

The sales budget for the first eight months of 2012 shows the following ­projections:

Month     Units       Month     Units  

January   25,000     May     31,400  

February  27,000     June     34,500

March     32,000     July     36,700

April     28,500     August     35,000 

Inventory on December 31 of the previous year was budgeted at 6,250 units. The desired quantity of finished- goods inventory at the end of each month in 2012 is to be equal to 25 percent of the next month’s budgeted unit sales. Each unit of finished product requires three pounds of raw material. The company wants to have 30 percent of next month’s required raw materials on hand at the end of each month. A. Prepare a production budget for January through June of 2012. B. Prepare a material purchases budget for the same period, assuming that each pound of raw material costs $ 22.

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