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 50,000 75,000 90,000 80,000 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 sales. The inventory at the end of March was 5,000 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 unit sales Total needs Required production in units

Explanation / Answer

April May June Quarter Budgeted unit sales 50000 75000 90000 215000 Add desired units of ending Fnished goods inventory 7500 9000 8000 8000 Total needs 57500 84000 98000 223000 Less units of beginning Fnished goods inventory 5000 7500 9000 5000 Required production in units 52500 76500 89000 218000

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