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 86,000 90,000 126,000 98,000 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 unit sales. The inventory at the end of March was 8,600 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

=86000+(90000*.10)

=95000

=90000+(126000*.10)

=102600

=126000+(98000*.10)

=135800

=95000-8600

=86400 units

=102600-9000

=93600 units

=135800-12600

=123200 units

April May June Quarter Budgeted unit sales 86000 90000 126000 302000 Total needs(unit sales+closing inventory which is 10% of next month sale)

=86000+(90000*.10)

=95000

=90000+(126000*.10)

=102600

=126000+(98000*.10)

=135800

=333400 Required production in units=Total needs-Opening inventory

=95000-8600

=86400 units

=102600-9000

=93600 units

=135800-12600

=123200 units

303200 units

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