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 June July Sales in Units 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 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. Down Under Products, Ltd Production Budget April May June Quarter Budgeted unit sales Total needs Required production in units

Explanation / Answer

Down Under Products Ltd. Production Budget Particulars April May   June Quarter Beginning unit sales           50,000           75,000           90,000 215,000 Note 1 Add : Desired ending inventory             7,500             9,000             8,000       8,000 Total needs           57,500           84,000           98,000 223,000 Less : Beginning inventory             5,000             7,500             9,000       5,000 Required production in units           52,500           76,500           89,000 218,000 Note 1 Desired ending inventory 75,000*10% 90,000*10% 80,000*10%

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