The sales budget for next year for a particular type of rope manufactured by Norman Ropes is as follows:

The stock of finished rope at the start of each period is to be equal to 25% of the sales estimate for the period. (Norman Rope’s policy concerning finished product stock levels is to have a quantity of rope in stock approximately equal to one week’s sales.) Exceptionally, at the beginning of period 1 there will be 1,500 metres of rope in stock. There is no work-in-progress at the end of any period. This type of rope uses only one material, a nylon cord known as ARN. Many lengths of this cord are twisted together to form the rope. The budget assumes that each metre of rope uses 100 metres of ARN and that each metre of ARN will cost £0.04.

Materials equal to 25% of each period’s usage are to be on hand at the start of the period. Exceptionally, the stock at the start of period 1 will be 125,000 metres of ARN. (Norman Rope’s policy concerning raw material stock levels is to have a quantity of material in stock approximately equal to one week’s usage.)

Tasks:

For the first six periods, prepare:

a) The production budget (in metres of rope);

b) The materials usage cost budget;

c) The materials purchases cost budget.