Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

	Unit Sales
April		52,000
May		75,000
June		92,000
July		81,000

The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 15% of the following month’s unit sales. The inventory at the end of March was 7,800 units.

	Unit Sales
April		52,000
May		75,000
June		92,000
July		81,000

Required:

Prepare a production budget by month and in total, for the second quarter.

Budgeted unit sales: April     May     June      Quarter

Total needs: April     May     June      Quarter

Required Production in Units: April     May     June      Quarter

Answer 1

Answer

--Production Budget

	April	May	June	Quarter
Unit sales	52,000	75,000	92,000	219,000
Add: Desired ending inventory of finished units [15% of next month’s sale]	11,250	13,800	12,150	12,150
Total needed	63,250	88,800	104,150	231,150
Less: Beginning inventory of finished units	7,800	11,250	13,800	7,800
Units to be produced	55,450	77,550	90,350	223,350