Question

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

Unit Sales

April 50,000

May 75,000

June 90,000

July 80,000

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 5,000 units.

Required:

Prepare a production budget by month and in total, for the second quarter.

Answer 1

Correct Answer:

Down Under Products, Ltd.,
Production Budget
	April	May	June	Quarter
Budgeted unit sales	50000	75000	90000	215000
Add: Desired Units of Ending Finished Inventory	7500	9000	8000	8000
Total needs	57500	84000	98000	223000
Less: Units of Beginning finished goods Inventory	5000	7500	9000	5000
Required production in units	52500	76500	89000	218000

End of answer.

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