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In: Accounting

Production Budget Palmgren Company produces consumer products. The sales budget for four months of the year...

Production Budget

Palmgren Company produces consumer products. The sales budget for four months of the year is presented below.

Unit Sales   Dollar Sales
July   31,000     $970,000
August   34,500     1,063,300
September   41,000     1,197,000
October   35,500     1,142,700
Company policy requires that ending inventories for each month be 25 percent of next month’s sales. At the beginning of July, the beginning inventory of consumer products met that policy.

Required:

Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.

Palmgren Company
Production Budget
For the Third Quarter
July   August   September   Total
Unit sales   fill in the blank 1
fill in the blank 2
fill in the blank 3
fill in the blank 4

fill in the blank 6
fill in the blank 7
fill in the blank 8
fill in the blank 9
Total needed   fill in the blank 10
fill in the blank 11
fill in the blank 12
fill in the blank 13

fill in the blank 15
fill in the blank 16
fill in the blank 17
fill in the blank 18
Units produced   fill in the blank 19
fill in the blank 20
fill in the blank 21
fill in the blank 22


Solutions

Expert Solution

ANSWER:

As per the company polcy the ending inventory for each month is 25% of next month's sale

So as ending inventory of june is the same as begining inventory of july

July sales units = 31000 units

July begining inventory = 31000 units*25% = 7750 units

July ending inventory = August sales units*25% = 34500 units*25% = 8625 units

So Required production units for july = July sales units+July ending inventory = 31000 units+8625 units = 39625 units

  • So units to be produced for july = Required production units for july-July begining inventory = 39625 units-7750 units = 31875 units

July ending inventory is the same as august begining inventory

August sales units = 34500 units

August begining inventory = 8625 units

August ending inventory = September sales units*25% = 41000 units*25% = 10250 units

So Required production units for August = August sales units+August ending inventory = 34500 units+10250 units = 44750 units

  • So units to be produced for August = Required production units forAugust-August begining inventory = 44750 units-8625 units = 36125 units

August ending inventory is the same as September begining inventory

September sales units = 41000 units

September begining inventory = 10250 units

September ending inventory = October sales units*25% =35500 units*25% = 8875 units

So Required production units for September = September sales units+September ending inventory = 41000 units+8875 units = 49875 units

  • So units to be produced for September = Required production units for September-September begining inventory = 49875 units-10250 units = 39625 units

Total units to be produced for the quarter = units to be produced for September+units to be produced for August+units to be produced for july = 39625 units+36125 units+31875 units = 107625 units

Production budget for palmgren company
JULY    August    September    3rd QUARTER
A Sales units 31000 34500 41000 106500
B Ending inventory units 8625 10250 8875
C Required production units(A+B) 39625 44750 49875
D Begining inventory 7750 8625 10250
E Units to be produced(C-D) 31875 36125 39625 107625

ekkarill92 answered 10 months ago
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