# Question

Production and purchases budgets. Osage Inc. has actual sales for May and June and forecast sales for July, August, September, and October as follows:
Actual:
May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,900 units
June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 units
Forecast:
July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 units
August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,800 units
September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 units
October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,700 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 70% of the next month’s sales. It is currently estimated that there will be 4,400 units on hand at the end of June. Calculate the number of units to be produced in each of the months of July, August, and September.
b. Each unit of finished product requires 6.5 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 60% 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 June. Calculate the number of pounds of raw materials to be purchased in each of the months of July and August.

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