ABC Unlimited Comp. makes decorative throw pillows for home use. The company sells the pillows to...


ABC Unlimited Comp. makes decorative throw pillows for home use. The company sells the pillows to home decor retailers for $14 per pillow. Each pillow requires 1.25 yards of fabric, which the company obtains at a cost of $6 per yard. The company would like to maintain an ending stock of fabric equal to 10% of the next month's production requirements. The company would also like to maintain and ending stock of finished pillows equal to 20% of the next month sales.

Sales (in units) are projected to be as follows for the first 3 months of the year:

January 200,000

February 220,000

March 230,000

a. Prepare the sale budget, including a separate section that details the types of sales made. For this section, assume that 20% of the company's pillows are cash sales, while the remaining 80% are sold on credit terms.

b. Prepare the production budget. Assume that the company anticipates selling 240,000 units in April.

c. Prepare the direct materials purchase budget assume that the company need 300,000 yards of fabric for production in April.

The Sales, Production, and Direct Materials Budgets:

The sales, production and direct materials budgets are often prepared in this sequence because the one build upon the previous one and provides information for the next one. After these have been prepared, the direct labor and overhead cost budgets can follow.

Answer and Explanation: 1

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ABC Unlimited Comp.

Sales Budget for the first quarter

Jan Feb Mar Total
Sales (units) 200,000 220,000 230.000 650,000
Selling Price per unit $1...

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Learn more about this topic:

Different Parts of the Master Budget


Chapter 6 / Lesson 2

The master budget is an important document that outlines all of the major costs of a business and creates a concise overview of its performance. Learn more about what a master budget is, why having a master budget is important, and its various elements.

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