Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: Unit Sales April Мay 50,000 75,000 90,000 80,000 June July 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 5,000 units Required: Prepare a production budget by month and in total, for the second quarter. Down Under Products, Ltd. Production Budget April May June Quarter ces Budgeted units sales Total needs Required production in units

Answer 1

Down Under Production Ltd Production Budget April May Budgeted unit Sales 50000 75000 Add: Desire Ending Finished goods units 7500 9000) Total Required units 57500 84000 Less: Beginning Finished goods unit 5000 7500 Required production units 52500 76500 June 90000 8000) 98000 9000 89000 Quarter 215000 8000 223000 5000 218000 Working notes: Ending Finished goods inventory is 10% of next quarter sales April = 75000 * 10/100 = 7500 May = 90000* 10/100 = 9000 june = 80000* 10/100 = 8000 Beginning inventory is previous quarter Ending finished goods April = 5000 May = 7500 June = 9000