Question

Ortiz Company's sales budget projects unit sales of part 198Z of10,000 units in January, 12,000 units in February, and 13,000 unitsin March. Each unit of part 198Z requires 2 pounds of materials,which cost $3 per pound. Ortiz Company desires its ending rawmaterials inventory to equal 40% of the next month's productionrequirements, and its ending finished goods inventory to equal 25%of the next month's expected unit sales. These goals were met atDecember 31, 2010.


1. Prepare a production budget for January and February 2011.(Enter all amounts as positive amounts and subtract wherenecessary.)

2. Prepare a direct materials budget for January 2011. (Enter allamounts as positive amounts and subtract where necessary.)