Question

Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $15. Lugo projects sales for April will be 4,500 packages, with sales increasing by 300 packages per month for May, June, and July. On Apr 1, Lugo has 150 packages on hand but desires to maintain an ending inventory of 20% of the next month's sales. Prepare a sales budget and a production budget for Lugo for April, May, and June. Begin by preparing a sales budget for April, May, and June. Lugo Company Sales Budget April, May, and June April May June | Total Budgeted packages to be sold Sales price per package Total sales Now prepare a production budget for April, May, and June. Lugo Company Production Budget April, May, and June April May June Total Plus: Total packages needed Less: Budgeted packages to be produced

Answer 1

Lugo Company
Sales Budget
April, May, and June
	April	May	June	Total
Budgeted packages to be sold	4500	4800	5100	14400
Sales price per package	$               15	$               15	$               15	$                   15
Total sales	$       67,500	$       72,000	$       76,500	$       216,000
Lugo Company
Production Budget
April, May, and June
	April	May	June	Total
Budgeted packages to be sold	4500	4800	5100	14400
Plus: Desired ending inventory	960	1020	1080	1080
Total packages needed	5460	5820	6180	15480
Less: Beginning inventory	150	960	1020	150
Budgeted packages to be produced	5310	4860	5160	15330

June ending inventory = 20% x (5100 + 300) = 20% x 5400 = 1080