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Silk house SDN BHD manufactures silk scarfs and is planning to sale 4,000 scarfs in April; 3,700 in May and, 3,500 in June
Silk house SDN BHD manufactures silk scarfs and is planning to sale 4,000 scarfs in April; 3,700 in May and, 3,500 in June. The company’s policy is to maintain a finished goods inventory equal to 10% of the next month’s sales. Assume finished goods inventory at the end of June is estimated to be 300 scarfs. In addition, Silk scarf requires one meter of silk.
- Prepare the production budget (April; May and June)?
- Prepare the raw material budget for quarter 2 (April; May and June)?
- Prepare the production budget (April; May and June)?
- Prepare the raw material budget for quarter 2 (April; May and June)?
Expert Solution
1. Production budget of SDN BHD
| Particulars |
April (in units) |
May (In units) |
June (In units) |
| Opening Inventory | 400 | 370 | 350 |
| Production during the month | 3970 | 3680 | 3450 |
| Sales during the month | 4000 | 3700 | 3500 |
| Closing inventory | 370 | 350 | 300 |
2. Raw material budget of SDN BHD
| Particulars |
April (In Meters) |
May (In Meters) |
June (In Meters) |
| Opening Inventory | 400 | 368 | 345 |
| Purchase of Raw material | 3938 | 3657 | 3405 |
| Raw material used for production | 3970 | 3680 | 3450 |
| Closing inventory | 368 | 345 | 300 |
Due to insuffecient information the following assumptions are considered in constructing Raw material budget :
- Opening raw material inventory in April is assumed at 400 meters (according to the finished product inventory).
- Closing raw material inventory in June is assumed at 300 meters (according to the finished product inventory).
- Closing raw material inventory is assumed to be maintained at 10% of next months production.
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