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: Unit Sales 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 unit sales. The inventory at the end of March was 14,400 units. Required: Prepare a production budget by month and in total, for the second quarter.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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:
| Unit Sales | |||
| 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 unit sales. The inventory at the end of March was 14,400 units.
Required:
Prepare a production budget by month and in total, for the second quarter.
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