Lancing corporation has budgeted sales of its unique product for the next four m

Question

Lancing corporation has budgeted sales of its unique product for the next four months as follows: October November December January 90,000 95,000 70,000 85,000 The company is in the process of preparing a production budget for the fourth 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 September was 15,000 units. Required: (please show your workings) Prepare a production budget by month and in total, for the fourth quarter

Explanation / Answer

PRODUCTION BUDGET Oct Nov Dec QUARTER Jan Budgeted Sales Units 70,000 85,000 90,000 245,000 95,000 Add: Desired Ending Finished inventory 17,000 18,000 19,000 19,000 Total Needs 87,000 103,000 109,000 264,000 Less: Beginning Finished Inventory 15,000 17,000 18,000 15,000 Required Production in units 72,000 86,000 91,000 249,000

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