Question

Exercise 10-6

Sipacore produces a vitamin-enhanced dog food that is sold in Kansas. The company expects sales to be 12,000 bags in January, 14,300 bags in February, 13,700 bags in March, and 16,200 bags in April. There are 1,390 bags on hand at the start of January. Sipacore desires to maintain monthly ending inventory equal to 15 percent of next month’s expected sales.

Prepare the production budget for Sipacore for the months of January, February, and March.

Sipacore Production Budget For the months of January, February, and March
	January	February	March	Quarter
Units to be producedUnit salesDesired ending inventory of finished unitsTotal neededBeginning inventory of finished units
LessAdd : Unit salesDesired ending inventory of finished unitsUnits to be producedTotal neededBeginning inventory of finished units
Desired ending inventory of finished unitsUnits to be producedUnit salesTotal neededBeginning inventory of finished units
LessAdd : Unit salesTotal neededUnits to be producedDesired ending inventory of finished unitsBeginning inventory of finished units
Units to be producedTotal neededDesired ending inventory of finished unitsBeginning inventory of finished unitsUnit sales

Answer 1

Sipacore
Production Budget for the months of January, February, March
		(No. of Bags)
Particulars	Remark	January	February	March	Quarter
Unit Sales		12000	14300	13700	40000
Desired Ending inventory of finished units	(15% of next month sale)	2145	2055	2430	2430
Total Needed		14145	16355	16130	42430
Less:- Beginning inventory of finished units	(Ending inventory of previous month)	-1390	-2145	-2055	-1390
Units to be Produced		12755	14210	14075	41040

Production Budget for January
Particulars	Remarks	No. of Bags
Unit Sales		12000
Desired Ending inventory of finished units	(15 % of Februray sale units i.e. 15% of 14,300)	2145
Total Needed		14145
Less:- Beginning inventory of finished units		-1390
Units to be Produced		12755

Production Budget for February
Particulars	Remarks	No. of Bags
Unit Sales		14300
Desired Ending inventory of finished units	(15 % of March sale units i.e. 15% of 13,700)	2055
Total Needed		16355
Less:- Beginning inventory of finished units	(Ending invntory of January)	-2145
Units to be Produced		14210

Production Budget for March
Particulars	Remarks	No. of Bags
Unit Sales		13700
Desired Ending inventory of finished units	(15 % of April sale units i.e. 15% of 16,200)	2430
Total Needed		16130
Less:- Beginning inventory of finished units	(Ending inventory of March)	-2055
Units to be Produced		14075

Production Budget for Quarter
Particulars	Remarks	No. of Bags
Unit Sales	(12000+14300+13700)	40000
Desired Ending inventory of finished units	(15 % of April sale units i.e. 15% of 16,200)	2430
Total Needed		42430
Less:- Beginning inventory of finished units	(Beginning inventory of January)	-1390
Units to be Produced		41040