Production Budget : Down Under Products, Ltd., of Australia has budgeted sales o

Question

Production Budget: 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 10% of the following month’s sales. The inventory at the end of March was 5,000 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.

Explanation / Answer

Particulars April May June Opening Inventory 5000 7500 9000 Add: Units Purchased 52500 76500 89000 Less: Sales 50000 75000 90000 Closing Balance 7500 9000 8000

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