Bailey Company expects to sell 1,500 units of finished product in January and 1,

Question

Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month's sales. March sales are expected to be 1,820 units. Prepare Bailey's production budget for January and February. Select the labels, enter the amounts and prepare the production budget for January. Then, prepare the production budget for February Bailey Company Production Budget Two Months Ended January 31 and February, 28 January February 1500 1750 Plus: Total units needed Less: Budgeted units to be produced

Explanation / Answer

Desired Ending Inventory for January = February Sales*80%

= 1,750 units*80% = 1,400 units

Desired Ending Inventory for February = March Sales*80%

= 1,820 units*80% = 1,456 units

The production budget for the month of January and February is shown as follows:-

Bailey Company

Production Budget

Two months ended January 31 and February, 28 (in units)

Particulars January February Budgeted units to be sold 1,500 1,750 Plus: Desired Ending Inventory 1,400 1,456 Total units needed 2,900 3,206 Less: Beginning Inventory (180) (1,400) Budgeted units to be produced 2,720 1,806

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