Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: April May June July Unit Sales 62,000 80,000 102,000 86,000 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 10% of the following month's unit sales. The inventory at the end of March was 6,200 units. Required: Prepare a production budget by month and in total, for the second quarter. Down Under Products, Ltd., Production Budget April May June Quarter Budgeted units sales Total needs 0 0 0 0 Required production in units 0 0 0

Answer 1

	Production Budget
				April	May	June	July	Quarter
	Budgeted units sales			62000	80000	102000	86000	244000
Add:	Desired ending inventory			8000	10200	8600		26800
	Total needs			70000	90200	110600		270800
Less:	Beginning Inventory			6200	8000	10200		24400
	Req. production in units			63800	82200	100400		246400

Desired Ending Inventory =			10% of sales for the following month
Like, for May, Inventory =			10% of 102000 (i.e., sales of June)
		=	10200