Chapter 9, Problem 9.22AE

Production and direct materials budgets (Learning Objective 2)

Osborne Manufacturing produces self-watering planters for use in upscale retail establishments. Sales projections for the first five months of the upcoming year show the estimated unit sales of the planters each month to be as follows:

	Number of planters to be sold
January	3,400
February	3,800
March	3,300
April	4,900
May	4,600

Inventory at the start of the year was 850 planters. The desired inventory of planters at the end of each month in the upcoming year should be equal to 25% of the following month’s budgeted sales. Each planter requires three pounds of polypropylene (a type of plastic). The company wants to have 20% of the polypropylene required for next month’s production on hand at the end of each month. The polypropylene costs $0.20 per pound.