Question

OBJECTIVE CORNERSTONE 8.2 Cornerstone Exercise 8.2 Production Budget Refer to Cornerstone Exercise 8.1, through Requirement 1. Flash Kick requires ending inventory of product to equal 20 percent of the next month's unit sales. Beginning inventory in January was 3,100 practice soccer balls and 400 match soccer balls. Required: I. Construct a production budget for each of the two product lines for Flash Kick Company for the first three months of the coming year. 2. What if Flash Kick wanted a production budget for the two product lines for the month of April? What additional information would you need to prepare this budget?

Answer 1

Exercise 8.1 Sales Budget

1. Sales Budget for Flashkick for first three months:

Sales Budget of Flashkick for Quarter 1
	January			February			March			Quarter 1
	Units	Price Per unit	Total	Units	Price Per unit	Total	Units	Price Per unit	Total	Units	Total
Practice Soccer Ball	50000	8.75	437,500.00	58000	8.75	507,500.00	80000	8.75	700,000.00	188000	1,645,000.00
Match Soccer Ball	7000	16.00	112,000.00	7500	16.00	120,000.00	13000	16.00	208,000.00	27500	440,000.00
	57000		549,500.00	65500		627,500.00	93000		908,000.00	215500	2,085,000.00

2. Sales Budget with Product line 3 - Tournament quality Soccer Ball

Sales Budget of Flashkick for Quarter 1
	January			February			March			Quarter 1
	Units	Price Per unit	Total	Units	Price Per unit	Total	Units	Price Per unit	Total	Units	Total
Practice Soccer Ball	50000	8.75	437,500.00	58000	8.75	507,500.00	80000	8.75	700,000.00	188000	1,645,000.00
Match Soccer Ball	7000	16.00	112,000.00	7500	16.00	120,000.00	13000	16.00	208,000.00	27500	440,000.00
Tournament quality Soccer Ball	2800	45.00	126,000.00	3000	45.00	135,000.00	5200	48.00	249,600.00	11000	510,600.00
	59800		675,500.00	68500		762,500.00	98200		1,157,600.00	226500	2,595,600.00

Exercise 8.2 Production Budget:

1. Production budget for first three months:

	Practice Soccer Ball			Match Soccer Ball
	January	February	March	January	February	March
Budgeted Sales	50000	58000	80000	7000	7500	13000
Add: Desired Ending Inventory (20% of next month sales)	11600	16000	20000	1500	2600	3600
	61600	74000	100000	8500	10100	16600
Less: Opening Inventory (Ending inventory of previous month becomes beginning inventory of current month)	3100	11600	16000	400	1500	2600
	58500	62400	84000	8100	8600	14000

2. In order to prepare for April, Units sold for the month of May is required. Because in order to calculate ending inventory for April, which is equal to 20% of next month sales, May month details are required.