Joe's Ceramics Company expects to begin the coming year with 7,000 ceramic pots in finished goods inventory. It expects to sell 95,000 ceramic pots and end the year with 12,000 pots in the finished goods inventory. Five pounds of clay go into each ceramic pot. The company expects to have 2,000 pounds of clay on hand at the beginning of the coming year and wishes to end the year with 4,000 pounds in inventory.
a. Prepare a production budget showing the number of ceramic pots that the company must manufacture to carry out these plans.
b. Prepare a direct materials purchases budget showing the number of pounds of clay that the company must purchase during the year.