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At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October,...

At the beginning of September, L Company had 1,600 finished goods units. Budgeted sales for October, November, December, and January are 8,400 units and 10,200 units and 13,600 units and 7,400 units respectively. L Company wants to have sufficient units on hand at the end of each month to meet 20 percent of the following month’s budgeted sales. Prepare a Production Budget with columns for October, November, December and Total 4th Quarter.

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Answer #1
PRODUCTION BUDGET
Particulars October November December Total
Sales (A) 8,400 10,200 13,600 32,200
Planning ending units (B) 2,040 2,720 1,480 6,240
Total production required (A+B) 10,440 12,920 15,080 38,440
Beginning inventory (C) ( $ 1,600) ( $ 2,040) ( $ 2,720) ( $ 6,360)
Units to be produced(A+B-C) $ 8,840 $ 10,880 $ 12,360 $ 32,080

Here, the ending units of December is got by multiplying sales units of January with 20%.

Ending units of December = 7,400 x 20%

Ending units of December = 1,480.

SUMMARY:

All requirements have been provided.

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