Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: Unit Sales April 88,000 May 90,000 June 128,000 July 99,000 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 15% of the following month’s unit sales. The inventory at the end of March was 13,200 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 Budgeted units sales Total needs Required production in units

Answer 1

Solution

Down Under Products, Ltd.,
Production Budget
	April	May	June	Quarter
Budgeted unit sales	88000	90000	128000	306000
Add: Desired Units of Ending Finished Inventory	13500	19200	14850*	14850
Total needs	101500	109200	142850	320850
Less: Units of Beginning finished goods Inventory	13200	13500	19200	13200
Required production in units	88300	95700	123650	307650

*99000 x 15%

Units in beginning of April will be 15% of April units sold because that would have been the March's desired ending inventory.