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 une July Unit Sales 54,000 75,000 94,000 82,000 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 unit sales. The inventory at the end of March was 10,800 units Required: Prepare a production budget by month and in total, for the second quarter. Down Under Products, Ltd Production Budget April May June Quarter Budgeted units sales Total needs 0 Required production in units 0 0

Explanation / Answer

Solution: Down Under Products, Ltd., Production Budget April May June Quarter Budgeted units sales 54,000 75,000 94,000 223,000 Add: Desired units of ending Finished goods inventory 15,000 18,800 16,400 16,400 Total needs 69,000 93,800 110,400 239,400 Less: Units of beginning Finished goods inventory 10,800 15,000 18,800 10,800 Required production in units 58,200 78,800 91,600 228,600 Working Notes: Down Under Products, Ltd., Production Budget April May June Quarter Budgeted units sales 54,000 75,000 94,000 223,000 Add: Desired units of ending Finished goods inventory 75,000 x 20% = 15,000 94,000 X 20%=18,800 82,000 X 20% = 16,400 16400** Total needs 69000 93800 110400 239400 Less: Units of beginning Finished goods inventory 10,800 15,000 18,800 10800* Required production in units 58,200 78,800 91,600 228,600 July budgeted units sales 82,000 Desired units of ending Finished goods inventory for June = 82,000 x 20% = 16,400 **16,400 is closing inventory for quarter *10,800 is beginning inventory of quarter Please feel free to ask if anything about above solution in comment section of the question.

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