Final answer:
The production budget for Down Under Products for the second quarter is calculated based on the sales budget and the desired ending inventory levels. The company will need to produce 64,200 units in April, 90,800 units in May, and 107,400 units in June, totaling 262,400 units for the quarter.
Step-by-step explanation:
To prepare a production budget for Down Under Products, we need to incorporate the desired ending inventory levels which should be 20% of the following month's unit sales. We will calculate the production needed for each month by adding the desired ending inventory to the sales for that month and then subtracting the beginning inventory. The beginning inventory for a month is the desired ending inventory from the previous month.
Production Budget Calculation
- April: (75,000 units in May x 20%) + 54,000 in April - 10,800 units (March ending inventory) = 64,200 units to be produced in April.
- May: (94,000 units in June x 20%) + 75,000 in May - 15,000 units (April ending inventory) = 90,800 units to be produced in May.
- June: (82,000 units in July x 20%) + 94,000 in June - 18,800 units (May ending inventory) = 107,400 units to be produced in June.
- July: Since we are only concerned with the second quarter, July's production number is not required here.
Total Production for Second Quarter
The total units to be produced in the second quarter (April, May, and June) is the sum of the production for each month:
- April: 64,200 units
- May: 90,800 units
- June: 107,400 units
- Total: 262,400 units