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 52,000 75,000 92,000 81,000 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 15% of the following month's sales The inventory at the end of March was 7,800 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 units sales Total needs 0 0 Required production in units 0 0

Explanation / Answer

Down Under Products, Ltd., Production Budget April May June Quarter Budgeted unit sales                                52,000                                75,000                                92,000                              219,000 Add: Desired Ending inventory 75,000*15% = 11,250 92,000*15% = 13,800 81,000*15% = 12,150 81,000*15% = 12,150 Total needs                                63,250                                88,800                              104,150                              231,150 Less: Beginning inventory                                   7,800 75,000*15% = 11,250 92,000*15% = 13,800                                   7,800 Required production in units                                55,450                                77,550                                90,350                              223,350

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