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 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.

Unit Sales April 58,000 May 75,000 June 98,000 July 84,000

Explanation / Answer

Down Under Products, Ltd.

Production Budget

April May June Quarter Sales in units 58,000 75,000 98,000 231,000 Ending inventory 11,250 (75,000*15%) 14,700 (98,000*15%) 12,600 (84,000*15%) 12,600 Total needs 69,250 89,700 110,600 243,600 Beginning inventory (8,700) (11,250) (14,700) (8,700) Production in units 60,550 78,450 95,900 234,900

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