Question

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:

	Sales in Units
April		72,000
May		85,000
June		112,000
July		91,000

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 20% of the following month’s sales. The inventory at the end of March was 14,400 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
	April	May	June	Quarter
Budgeted unit sales
ADD or Less
Total needs	0	0	0	0
ADD or Less
Required production in units	0	0	0	0

Answer 1

Down Under Products, Ltd.,
Production Budget
	April	May	June	Quarter
Budgeted unit sales	72000	85000	112000	269000
Add: Desired Closing Inventory	17000	22400	18200	18200
Total needs	89000	107400	130200	287200
Less: Beginning Inventory	14400	17000	22400	14400
Required production in units	74600	90400	107800	272800

June's Closing Inventory
July sales	91000 units
June's Closing Inventory (20% of 91000)	18200