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 sales. The inventory at the end of March was 10,800 units

Sales in Units April 54,000 May 75,000 June 94,000 July 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 sales. The inventory at the end of March was 10,800 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

Calculations Particulars Apr May Jun Quarter A Sales units 54000 75000 94000 223000 B = A of next month x 20% Closing Inventory 15000 18800 16400 50200 C = B of previous month Opening Inventory 10800 15000 18800 44600 D = A + B - C Required production units 58200 78800 91600 228600

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