Chapter 14, Problem 14.9E

To determine

Concept Introduction:

Budget: It is forward looking exercise which the company takes by preparing estimated revenues, costs and resources needed by company for a period. It can be prepared for single period or for multiple periods

Production Budget: The estimated production of finished goods for each period is calculated by preparing the production budget. The starting point is sales budget and requirement of opening and closing inventory is determined. The formula to calculate the production quantity is given below

  $\text{Productuon Quantity = Quantity sold + closing Finished goods Inventory - Opening Finished goods Inventory}$

Purchase Budget : The estimated purchase of raw material required to produce finished goods is calculated while preparing the purchase budget. The formula to calculate budgeted purchase of raw material is given below

  $\text{Purchase Quantity = Quantity required in production +closing raw material Inventory - Opening raw material Inventory}$

REQUIREMENT (a)

To calculate:

The purchase quantity in ounces of Ocean scent in Quarter I and II in 2016

To determine

Concept Introduction:

Budget: It is forward looking exercise which the company takes by preparing estimated revenues, costs and resources needed by company for a period. It can be prepared for single period or for multiple periods

Production Budget: The estimated production of finished goods for each period is calculated by preparing the production budget. The starting point is sales budget and requirement of opening and closing inventory is determined. The formula to calculate the production quantity is given below

  $\text{Productuon Quantity = Quantity sold + closing Finished goods Inventory - Opening Finished goods Inventory}$

Purchase Budget : The estimated purchase of raw material required to produce finished goods is calculated while preparing the purchase budget. The formula to calculate budgeted purchase of raw material is given below

  $\text{Purchase Quantity = Quantity required in production +closing raw material Inventory - Opening raw material Inventory}$

REQUIREMENT (b)

The reason for having closing raw material inventory for each quarter