Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:Unit SalesApril 82,000May 90,000June 122,000July 96,000The 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 12,300 units. Required:Prepare a production budget by month and in total, for the second quarter.

Results are below.

Explanation:

Giving the following information:

Sales:

April 82,000

May 90,000

June 122,000

July 96,000

Desired ending inventory= 15% of the following month's unit sales.

The inventory at the end of March was 12,300 units

To calculate the production required, we need to use the following formula:

Production= sales + desired ending inventory - beginning inventory

April:

Sales= 82,000

Desired ending inventory= 90,000*0.15= 13,500

Beginning inventory= (12,300)

Total production= 83,200

May:

Sales= 90,000

Desired ending inventory= 122,000*0.15= 18,300

Beginning inventory= (13,500)

Total production= 94,800

June:

Sales= 122,000

Desired ending inventory= 96,000*0.15= 14,400

Beginning inventory= (18,300)

Total production= 118,100

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