Exercise 8-2 Production Budget [LO8-3] Down Under Products, Ltd., of Australia h

Question

Exercise 8-2 Production Budget [LO8-3] 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 58,000 75,000 98,000 84,000 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 unit sales. The inventory at the end of March was 8,700 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 Required production in units

Explanation / Answer

Down Under Products, Ltd., Production Budget April May June Quarter Budgeted Units Sales 58,000 75,000 98,000 231,000 Ending Enventory 75,000x15% =11,250 98,000x15% =14,700 84,000x15% = 12,600 12,600 Total needs 69,250 89,700 110,600 218,400 Beginning Inventor 8,700 11,250 14,700 8,700 Required production in units 60,550 78,450 95,900 234,900

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