Question

Company is preparing budgets for the quarter ending June 30, 2019.

Budgeted sales in units for the next five months are:
April 20,000
May 50,000
June 30,000
July 25,000


Required:
a. Prepare Sales budget for April, May & June assuming selling price per unit is 15.

b. Prepare production budget for April, May & June if the company wishes ending inventory as 10 % of next month sales units.

Answer 1

Results are below.

Explanation:

First, we need to determine the sales budget for April, May, and June:

Sales budget April:

Number of units sold= 20,000

Sales revenue= 20,000*15= $300,000

Sales budget May:

Number of units sold= 50,000

Sales revenue= 50,000*15= $750,000

Sales budget June:

Number of units sold= 30,000

Sales revenue= 30,000*15= $450,000

Now, the production budget using the following formula:

Production= sales + desired ending inventory - beginning inventory

Production budget April:

Sales= 20,000

Desired ending inventory= 50,000*0.1= 5,000

Beginning inventory= 0 (assuming no beginning inventory)

Production= 25,000

Production budget May:

Sales= 50,000

Desired ending inventory= 30,000*0.1= 3,000

Beginning inventory= (5,000)

Production= 48,000

Production budget June:

Sales= 30,000

Desired ending inventory= 25,000*0.1= 2,500

Beginning inventory= (3,000)

Production= 29,500