Problem:
Production and purchases budgets. Ozark Inc. has actual sales for August and September and forecasted sales for October, November, December, and January as follows:
Actual:
August 8,300 units
September 8,700 units
Forecasted:
October 8,400 units
November 9,500 units
December 7,800 units
January 7,400 units
Required:
a. The firm's policy is to have finished goods inventory on hand at the end of the month that is equal to 80% of the next month's sales. It is currently estimated that there will be 6,600 units on hand at the end of September. Calculate the number of units to be produced in each of the months of October, November, and December.
b. Each unit of finished product requires 4 pounds of raw materials. The firm's policy is to have raw material inventory on hand at the end of each month that is equal to 70% of the next month's estimated usage. It is currently estimated that 26,000 pounds of raw materials will be on hand at the end of September. Calculate the number of pounds of raw materials to be purchased in each of the months of October and November.