EXERCISE 8-2 Production Budget LO8-3 Down Under Products, Ltd., of Australia has
ID: 2564421 • Letter: E
Question
EXERCISE 8-2 Production Budget LO8-3 Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the tet four months as follows: Unit Sales April.... May June. July 50,000 75,000 90,000 ....80,000 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 10% of the following unit sales. The inventory at the end of March was 5,000 units. month's Required Using Schedule 2 as your guide, prepare a production budget by month and in total, for the quarter the secondExplanation / Answer
Solution:
April
May
June
Quarter
Budget Sales in units
50,000
75,000
90,000
215,000
Plus: desired ending inventory *
7,500
9,000
8,000
8,000
Total Requirements
57,500
84,000
98,000
223,000
Minus: Beginning Inventory
5,000
7,500
9,000
5,000
Required Production
52,500
76,500
89,000
218,000
*10% of the following month’s sales in units.
April
May
June
Quarter
Budget Sales in units
50,000
75,000
90,000
215,000
Plus: desired ending inventory *
7,500
9,000
8,000
8,000
Total Requirements
57,500
84,000
98,000
223,000
Minus: Beginning Inventory
5,000
7,500
9,000
5,000
Required Production
52,500
76,500
89,000
218,000
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