In: Accounting
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: |
Sales in Units | |||
April | 64,000 | ||
May | 80,000 | ||
June | 104,000 | ||
July | 87,000 | ||
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 15% of the following month’s sales. The inventory at the end of March was 9,600 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 | ||||
For 2nd Quarter | ||||
April | May | June | Quarter | |
Budgeted sales | 64,000 | 80,000 | 104,000 | 248,000 |
Add: Desired Ending Inventory | 80,000*15% = 12,000 | 104,000*15% = 15,600 | 87,000*15% = 13,050 | 87,000*15% = 13,050 |
Total Needs | 76,000 | 95,600 | 117,050 | 261,050 |
Less: Beginning inventory | 9,600 | 80,000*15% = 12,000 | 104,000*15% = 15,600 | 9,600 |
Required production | 66,400 | 83,600 | 101,450 | 251,450 |
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