Question

# Garden Space Novelties, Inc. budgeted the sales of their latest garden decoration as follows: Unit Sales...

Garden Space Novelties, Inc. budgeted the sales of their latest garden decoration as follows:

Unit Sales

April.........................7,000

May..........................6,000

June.......................14,000

July.........................12,000

The desired ending inventory must equal 10% of the next month's sales. The inventory at the end of March was 2,000 units. Prepare a production budget for the second quarter by month and in total for the quarter.

 Garden Space Novelties, Inc Production Budget For the Quarter Ended June 30 Quarter 2 Total April May June Expected unit sales 7,000 6,000 14,000 27,000 Add: Desired ending finished goods inventory   [Refer working note 1] 600 1,400 1,200 3,200 Total required units 7,600 7,400 15,200 30,200 Less: Beginning finished goods inventory          [Refer working note 2] 2,000 600 1,400 4,000 Required production units 5,600 6,800 13,800 26,200

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 Working Note 1 - Calculation of desired ending inventory for each month For April               [May unit sales x 10% = 6,000 x 10%] 600 units For May                 [June unit sales x 10% = 14,000 x 10%] 1,400 units For June                 [July unit sales x 10% = 12,000 x 10%] 1,200 units Working Note 2 - Beginning inventory for each month For April                   [Ending inventory of March]   [Mentioned in the question] 2,000 units For May                     [Ending inventory of April] 600 units For June                     [Ending inventory of May] 1,400 units

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