Down Under Products, Ltd., of Australia has budgeted sales of its popular boomer
ID: 2329722 • Letter: D
Question
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
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.
Sales in Units April 72,000 May 85,000 June 112,000 July 91,000Explanation / Answer
Down Under Products, Ltd.,
Production Budget
April
May
June
Quarter
Budgeted unit sales
72000
85000
112000
269000
Add: Desired Closing Inventory
17000
22400
18200
18200
Total needs
89000
107400
130200
287200
Less: Beginning Inventory
14400
17000
22400
14400
Required production in units
74600
90400
107800
272800
June's Closing Inventory
July sales
91000 units
June's Closing Inventory (20% of 91000)
18200
Down Under Products, Ltd.,
Production Budget
April
May
June
Quarter
Budgeted unit sales
72000
85000
112000
269000
Add: Desired Closing Inventory
17000
22400
18200
18200
Total needs
89000
107400
130200
287200
Less: Beginning Inventory
14400
17000
22400
14400
Required production in units
74600
90400
107800
272800
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