Down Under Products, Ltd., of Australia has budgeted sales of its popular boomer

Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: April May June July Sales in Units 90.000 95,000 130.000 100,000 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 18,000 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 May June Budgeted units sales Total needs Required production in units

Explanation / Answer

Down Under Products Ltd. Production Budget Particulars April May June Quarter April May June Budgeted Sales Units 90000 95000 130000 315000 Given Given Given Add: Desired Closing Inventory 19000 26000 20000 20000 95000*20% 130000*20% 100000*20% Total Needs 109000 121000 150000 335000 Less: Opening Inventory 18000 19000 26000 18000 Given April Closing May Closing Required Production in Units 91000 102000 124000 317000

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