Question: Diamond Slope Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company's management predicts that 7,000 skis and 10,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 120,000 skis will be sold during the next (third) quarter. Management wants to end the third quarter with 4,000 skis and 5,000 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $12 per pound.
Required: 1. Prepare the third-quarter production budget for skis.
2. Prepare the third-quarter direct materials (carbon fiber) budget; include the dollar cost of purchases.