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 66000 , 80,000 106,000 88,000 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 13,200 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 own Under Products, Ltd. roduction Budget April May June Quarter Budgeted unit sales Total needs Required production in units

Explanation / Answer

SOLUTION

Down Under Products Ltd.

Production Budget

*Desired units of ending Fnished goods inventory = 20% of the following month's sales in units

April May June Quarter Budgeted units sales 66,000 80,000 106,000 252,000 Add: Desired units of ending Fnished goods inventory* 16,000 21,200 17,600 17,600 Total needs 82,000 101,200 123,600 269,600 Less: Units of beginning Fnished goods inventory (13,200) (16,000) (21,200) (13,200) Required produc±on in units 68,800 85,200 102,400 256,400

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