Exercise 7-2 Production Budget [LO7-3] Down Under Products, Ltd., of Australia h
ID: 2545280 • Letter: E
Question
Exercise 7-2 Production Budget [LO7-3]
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.
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., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
Explanation / Answer
Answer
April
May
June
Budgeted Sale unit
54000
75000
94000
Add: Target ending inventory [20% of next month’ s sale]
15000
18800
16400
Total requirement
69000
93800
110400
Less: Opening Inventory [=ending inventory of last month]
[Given in question] 10800
15000
18800
Units to be produced
58200
78800
91600
April
May
June
Budgeted Sale unit
54000
75000
94000
Add: Target ending inventory [20% of next month’ s sale]
15000
18800
16400
Total requirement
69000
93800
110400
Less: Opening Inventory [=ending inventory of last month]
[Given in question] 10800
15000
18800
Units to be produced
58200
78800
91600
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