Smith Company has budgeted the following unit sales:

Smith Company has budgeted the following unit sales:

2015 Units

January 10,000

February 8,000

March 9,000

April 11,000

May 15,000

The finished goods units on hand on December 31, 2014, was 1,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of $3 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2014

 

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