Exercise 5-15

Marcy Jones, Bates & Hill Fabricators' purchasing manager, has just received the company's production budget for the first quarter.

		January		February			March			Quarter
Budgeted Production		22,200		38,200			33,800			94,200

Budgeted sales of April is 29,000 and its beginning inventory is 5,800. May month budgeted sales is 23,000. Company policy requires an ending finished goods inventory each month that will meet 20% of the following months sales volume. Each brick requires 5.00 pounds of clay, and Marcy expects to pay $0.4 per pound of clay in the coming year. Company policy requires an ending direct materials inventory each month that will meet 10% of the following month's production needs. Marcy expects to have 18,900 pounds of clay at a cost of $7,560 in inventory at the beginning of the year.