Budgets assignment 3
The chief sales officer of The Teak Table (TTT), a producer teak garden furniture, informed the board
that based on a reliable demand forecast, he is expecting to sell the following quantities of teak
wood tables the next year, by quarter (3-month period).
Quarter 1 2016 10.000
Quarter 2 2016 18.000
Quarter 3 2016 17.000
Quarter 4 2016 8.000
Quarter 1 2017 11.000
As a policy, TTT ensures that the ending balance of finished goods inventory each quarter (in units)
equals 40% of each following quarter’s sales projection.
Every table requires 20 Kg. of teak wood. On the first of January 2016 they will have 50.000 kilo’s in
stock. To make sure that they will not have to stop production due to a lack of teak wood, they need
the ending-inventory of every period to be at least 20% of the wood needed for the following
period’s production.
REQUIRED:
a) Prepare the production budget (in units), by quarter, for the year 2016, showing clearly the
production needs for each quarter.
b) Prepare the raw-materials purchase budget for teak (in kilograms), per quarter, for quarters
1, 2, & 3 of 2016, showing clearly the amount of kilo’s they need to buy per period.
The chief sales officer of The Teak Table (TTT), a producer teak garden furniture, informed the board
that based on a reliable demand forecast, he is expecting to sell the following quantities of teak
wood tables the next year, by quarter (3-month period).
Quarter 1 2016 10.000
Quarter 2 2016 18.000
Quarter 3 2016 17.000
Quarter 4 2016 8.000
Quarter 1 2017 11.000
As a policy, TTT ensures that the ending balance of finished goods inventory each quarter (in units)
equals 40% of each following quarter’s sales projection.
Every table requires 20 Kg. of teak wood. On the first of January 2016 they will have 50.000 kilo’s in
stock. To make sure that they will not have to stop production due to a lack of teak wood, they need
the ending-inventory of every period to be at least 20% of the wood needed for the following
period’s production.
REQUIRED:
a) Prepare the production budget (in units), by quarter, for the year 2016, showing clearly the
production needs for each quarter.
b) Prepare the raw-materials purchase budget for teak (in kilograms), per quarter, for quarters
1, 2, & 3 of 2016, showing clearly the amount of kilo’s they need to buy per period.
