Question

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

	Unit Sales
April		78,000
May		85,000
June		118,000
July		94,000

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 20% of the following month’s unit sales. The inventory at the end of March was 15,600 units.

Required:

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

Answer 1

		Production budget
			April	May	June	total
Expected sale units			78,000	85,000	118,000	281,000
Add:Ending inventory			17000	23600	18800	18800
Total needs			95,000	108,600	136,800	299,800
less:opening inventory			15,600	17000	23600	15,600
Budgeted production			79,400	91,600	113,200	284,200