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:

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 unit sales. The inventory at the end of March was 13,200 units.

Required:

Prepare a production budget by month and in total, for the second quarter.

Unit Sales April 66,000 May 80,000 June 106,000 July 88,000

Explanation / Answer

Prepare a production budget by month and in total, for the second quarter.

April May June Quarter Sales units 66000 80000 106000 252000 Add: Desired ending inventory 16000 21200 17600 17600 Total needs 82000 101200 123600 269600 Less: beginning inventory (13200) (16000) (21200) (13200) Production units 68800 85200 102400 256400

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