Explanation:
The preparation of the production budget for the first quarter of the year is presented below:
Tulum Inc.
Production Budget
For the Coming Quarter
January February March 1st Quarter Total
Sales 22,000 20,000 30,000 72,000
Desired
ending inventory 4,000 6,000 6,200 6,200
(20,000 ×20%) (30,000 ×20%) (31,000 ×20%)
Total needs 26,000 26,000 36,200 78,200
Less:
Beginning inventory 1,300 4,000 6,000 1,300
Units to
be produced 24,700 22,000 30,200 76,900