EXERCISE 9-2 Production Budget LO3] Down Under Products, L.d., of Australia has
ID: 2395064 • Letter: E
Question
EXERCISE 9-2 Production Budget LO3] Down Under Products, L.d., of Australia has budgeted sales of its popular boomerang for the next four months as follows: Sales in Units April. .50,000 May 75,000 June. 90,000 The company is now in the process of prepuring a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equa 10% of the following month's sales. The inventory at the end of March was 5,000 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.Explanation / Answer
Answers
Working
April
May
June
July
A [given]
Budgeted Sale Units
50000
75000
90000
80000
B = 10% of next month's 'A'
Expected Ending Inventory
7500
9000
8000
C = A + B
Total needs
57500
84000
98000
D = 'B' of Last month
Beginning Inventory
5000
7500
9000
E = C - D
Units required to be produced
52500
76500
89000
Working
April
May
June
July
A [given]
Budgeted Sale Units
50000
75000
90000
80000
B = 10% of next month's 'A'
Expected Ending Inventory
=75000*10%
=90000*10%
=80000*10%
C = A + B
Total needs
=50000+7500
=75000+9000
=90000+8000
D = 'B' of Last month
Beginning Inventory
5000
7500
9000
E = C - D
Units required to be produced
=57500-5000
=84000-7500
=98000-9000
April
May
June
Quarter [Total]
Budgeted Sale Units
50000
75000
90000
215000
Add: Expected Ending Inventory
7500
9000
8000
8000
Total needs
57500
84000
98000
223000
Less: Beginning Inventory
5000
7500
9000
5000
Units required to be produced
52500
76500
89000
218000
Working
April
May
June
July
A [given]
Budgeted Sale Units
50000
75000
90000
80000
B = 10% of next month's 'A'
Expected Ending Inventory
7500
9000
8000
C = A + B
Total needs
57500
84000
98000
D = 'B' of Last month
Beginning Inventory
5000
7500
9000
E = C - D
Units required to be produced
52500
76500
89000
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