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Budgets assignment 1

FILOART Ltd, a new business, will start production on 1 May, but sales will not start until 1
June. Planned sales for the next 9 month are as follows:




The selling price of a unit will be €100 in all nine months. Customers will get one month’s
credit. It is planned that sufficient finished goods inventories to cover 50% of each month’s
sales should be available at the end of the previous month.

Raw materials purchases will be such that there will be sufficient raw materials inventories
available at the end of each month precisely to meet the following month’s planned
production. This planned policy will operate from the end of May. Purchases of raw
materials will be on one month’s credit. The cost of raw material is €35 a unit of finished
product.

Required
Draw up the following for the June, July and August:
1. A finished inventories budget in units, also clearly showing the required level of
production.
2. A raw material inventories budget in units, also clearly showing the required level of
purchases.
3. A raw material inventories budget in Euros, also clearly showing the required level of
purchases.
4. A trade payables budget.