Question

Down under products, ltd., of australia has budgeted sales of its popular boomerang for the next four months as follows: sales in units april 54,000 may 75,000 june 94,000 july 82,000

Answer 1

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 20% of the following month’s sales. The inventory at the end of March was 10,800 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.

Answer: The total production for the quarter is 2,28,600. Monthly production is 58,200 78,800 and 91,600 units for April, May and june respectively.

April May June July

Forecasted Sales 54000 75000 94000 82000

less: Beginning Inventory - 10800 - 15000 - 18800

Current month's production 43200 60000 75200

Add: 20% of next month's sales +15000 +18800 +16400

Total monthly production 58,200 78,800 91,600

Total units for the quarter 2,28,600