In Preparing a Budget for the Last Three Months of the Current

question 16

Essay

In preparing a budget for the last three months of the current year, Country Cozy Company is planning the units of merchandise it must order each month. The company's policy is to have 15% of the next month's sales in its inventory at the end of each month. Projected sales for October, November, and December are 27,000 units, 29,500 units, and 31,000 units, respectively. How many units must be ordered in November?

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Definitions:

Indirect Material

Materials used in the production process but cannot be directly traced to a final product, such as lubricants and cleaning supplies used in a factory.

Factory Overhead

Encompasses all indirect costs involved in the manufacturing process, such as utilities, maintenance, and management salaries.

Direct Materials

Raw materials that can be directly attributed to the production of goods or services.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.