Question

Exercise 8-2 Production Budget [LO8-3] Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: 16.66 points April May June July Unit Sales 68,000 80,000 108,000 89,000 eBook Hint 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 10% of the following month's unit sales. The inventory at the end of March was 6,800 units. Required: Prepare a production budget by month and in total, for the second quarter. Print References Down Under Products, Ltd., Production Budget April May June Quarter Budgeted units sales Total needs Required production in units

Answer 1

Production Budget April May June Quarter Add Budgeted Units Sales Required Ending Inventory Total Required Units Beginning Inventory Required Production in units 68000 8000 76000 6800 69200 80000 10800 90800 8000 82800 108000 8900 116900 10800 106100 256000 8900 264900 6800 258100 Less Ending Inventory Calculation 10 % of following months sales units April = 10 % of Sales units of May = 80000 x 10% = 8000 May = 10 % of Sales units of June = 108000 x 10% =10800 June = 10 % of Sales units of July = 89000 x 10% = 8900 Quarter = Ending balance of June Beginning Inventory Calculation Last Months Ending Inventory is Current months beginning Inventory April = March's Ending Inventory May = April's Ending Inventory June = May's Ending Inventory Quarter = Beginning balance of April