Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: April May Sales in Units 72,000 85,000 112,000 91,000 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 20% of the following month's sales. The inventory at the end of March was 14,400 units. Required: Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total. Down Under Products, Ltd., Production Budget April Budgeted units sales 72,000 [Add: Desired units of ending finished goods inventory 14,400 Total needs 86,400 Less: Units of beginning finished goods inventory 7,200 Required production in units 79,200 May 85,000 17,000 102,000 8,500 93,500 June 112,000 22,400 134,400 11,200 123,200 Quarter 269,000 22,400 291,400 1,440 289,960

Answer 1

Producton Budget	April	may	June	Quater
Down Under Product Ltd.
Desire Budget Sale Units	72000	85000	112000	269000
Add:Desire closing stocks units 20%of Following month sales units ie closing stock of april will be 20% of sales units of may month	17000	22400	18200	57600
Total needs	89000	107400	130200	326600
Less:Desired opening stocks at the begining of the each month and quater ie closing stock of each month will be the opening stock of next month	14400	17000	22400	53800
Required units of Production	74600	90400	107800	272800