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 Unit Sales 58,000 75,000 98,000 84,000 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 unit sales. The inventory at the end of March was 8,700 units. Required Prepare a production budget by month and in total, for the second quarter. Down Under Products, Ltd. Production Budget April May June Quarter Budgeted units sales Total needs Required production in units

Explanation / Answer

Production budget :

April May June Quarter Budgeted unit sales 58000 75000 98000 231000 Add: Desired ending inventory 11250 14700 12600 12600 Total needs 69250 89700 110600 243600 Less: Beginning inventory (8700) (11250) (14700) (8700) Required production in units 60550 78450 95900 234900

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