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Grainger Manufacturing Inc. produces outdoor grills. On March 31, the company had 120 grills in inventory. The company's policy is to maintain a grill inventory equal to 15% of next month's sales. The company expects the following sales activity for the second quarter of the year:
April 800 unitsMay 2,000 unitsJune 2,600 units
Sales for July and August are expected to be 1,800 units and 1,400 units respectively. Each completed unit of finished product requires 3 pounds of a heat resistant plastic material which costs $4.00 per pound. The company has determined that it needs 20% of next month's raw material on hand at the end of each month. The company had 600 pounds of plastic on hand at the end of March.
A. Prepare a production budget for the second quarter of the year.
B. Prepare a budget for the second quarter of the year showing the projected cost of the direct materials (plastic) that will be needed.
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