Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: April May June July Unit Sales 56,000 75,000 96,000 83,000 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 10% of the following month's unit sales. The inventory at the end of March was 5,600 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

Down Under Products, Ltd. Production Budget April Budgeted units sales 56000 Add: Desired units of ending finished goods inventory 7500 Total needs 63500 Less: Units of beginning finished goods inventory 5600 Required production in units 57900 May 75000 9600 84600 7500 77100 June 96000 8300 104300 9600 94700 Quarter 227000 8300 235300 5600 229700 Fourth 110000 Year 440000 Mink Caress Direct Materials Budget - Year 2 Quarter First Second Third Required production in units of finished goods 70000 100000 160000 Units of raw materials needed per unit of finished goods Units of raw materials needed to meet production 210000 300000 480000 Add: Desired units of ending raw materials inventory 60000 96000 66000 Total units of raw materials needed 270000 396000 546000 Less: Units of beginning raw materials inventory 42000 60000 96000 Units of raw materials to be purchased 228000 336000 450000 Unit cost of raw materials 2.10 2.10 2.10 Cost of raw materials to purchased 478800 705600 945000 330000 48000 378000 66000 312000 2.10 655200 1320000 48000 1368000 42000 1326000 2.10 2784600