Prepare the direct materials purchases budget

Soft Pillows Unlimited makes decorative throw pillows for home use The company sells the pillows to home décor retailers for $14 per pillow

Standards:

Each pillow requires 125 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 an ending stock of finished pillows equal to 20% of the next month’s sales

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

January 100,000 February 110,000 March 115,000

Prepare the following for the 1^st quarter:

1 Prepare the sales budget

2 Prepare the production budget Assume that the company anticipates selling 120,000 units in April

3 Prepare the direct materials purchases budget Assume the company needs 150,000 yards of fabric for production in April