Problem 3 In preparation for arranging a $300,000 bank line of credit, Terra, Inc. needs to prepare a detailed budget. Their budget director has…

Problem 3
In preparation for arranging a $300,000 bank line of credit, Terra, Inc. needs to prepare a
detailed budget.
Their budget director has completed parts of the budget. For example, he has provided the
following budgeted sales for the selected four-month period:
Month
April
May
June
July Unit Sales
100,000
155,000
115,000
130,000 At the beginning of April, the company had 40,000 units of finished goods in inventory.
Their budget guidance indicates that they should retain their levels of finished goods
inventory equal to 20 percent of the unit sales for the next month.
In addition, in their production process: They use 5 pounds of a single raw material for each unit produced. Each pound
of material costs $8. Plans are to have inventory levels for materials equal to 25% percent of the
amount of materials needed to satisfy next month’s production and 175,000 units
of raw material on hand at the end of June. Materials inventory on April 1 was 118,000 pounds. Required:
Using the given information, prepare the following:
a. A Production budget in units for April, May, and June.
b. A Materials Purchases budget in pounds and in dollars for April, May, and June.

Problem 3 In preparation for arranging a $300,000 bank line of credit, Terra, Inc. needs to prepare a detailed budget. Their budget director has…
Problem 3 In preparation for arranging a $300,000 bank line of credit, Terra, Inc. needs to prepare a detailed budget. Their budget director has…