Question

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.

Answer 1

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