Budgeting ——detailed working for a question

Would like a detailed working of part (b) on how to get the closing and opening inventory.

Treehorn produces a single product. The cost card for this product is as follows:

Direct materials 3kg per unit at $6 per kg = 18
Direct labour 2hrs per unit at $10 per kg = 20
Fixed overhead 2hrs per unit at $2 per kg = 4
Total cost 42

notes

1. Treehorn prepares budgets on quarterly basis. Each quarter consist of 13 weeks,
with five working days per week.

2. Selling price is $56 per unit.

3. Treehorn incures no other cost than those included in the cost card.

4. It is Treehorn’s policy to maintain an inventory of finished goods at the end of each quarter equal to five days’ demand of the next quarter.

5. Because of its perishable nature it is not possible to hold raw material inventory.

6. Forcast sales units for the next five quarters are:

Quarter 1 1,950,000 units
Quarter 2 2,275,000 units
Quarter 3 3,350,000 units
Quarter 4 2,275,000 units
Quarter 5 1,950,000 units

Required

Produce the following budget for EACH of the quarters 1,2,3 and 4:

(a) A sales budget showing sales volume in units and sales revenue in $.

(b) A production budget showing opening and closing inventory, sales and production;

(c) A purchases budget showing purchases in kg and in $