Lock Tight, Inc., produces outside doors for installation on homes. The following information was gathered to prepare budgets for the upcoming year beginning January 1:
Sales forecast in units . . . . . . . . . . . . . . . . . . . . . . . . 6,500 doors
Finished goods inventory, Jan. 1 . . . . . . . . . . . . . . . . 720 doors
Target finished goods inventory, Dec. 31. . . . . . . . . 680 doors
Raw materials inventory—steel, Jan. 1 . . . . . . . . . . 40,000 pounds
Target inventory—steel, Dec. 31 . . . . . . . . . . . . . . . 80,000 pounds
Raw materials inventory—glass, Jan. 1 . . . . . . . . . . 6,000 square feet
Target inventory—glass, Dec. 31. . . . . . . . . . . . . . . . 4,000 square feet
Budgeted purchase price—steel . . . . . . . . . . . . . . . . . . . $4 per pound
Budgeted purchase price—glass . . . . . . . . . . . . . . . . . . . $2 per square foot
The manufacture of each door requires 20 pounds of steel and 6 square feet of glass.
a. Prepare the production schedule in units for Lock Tight.
b. Using the production schedule, develop the direct materials purchase budgets for steel and glass.
c. Why might Lock Tight’s target level of steel inventory be higher than last year’s ending balance and its target level of glass inventory be lower than last year’s ending balance?