Question

Production Budget Aqua-pro Inc. produces submersible water pumps for ponds and cisterns. The unit sales for selected months of the year are as follows: Unit Sales April 180,000 May 220,000 June 200,000 July 240,000 Company policy requires that ending inventories for each month be 25% of next month's sales. However, at the beginning of April, due to greater sales in March than anticipated, the beginning inventory of water pumps is only 21,000. Prepare a production budget for the second quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.

Answer 1

Production Budget April 214,000

Production Budget May 215,000

Production Budget June 210,000

Production Budget Total 639,000

Step-by-step explanation:

We use the formula to calculate the production budget

Production = Sales + Ending Inventory - Opening Inventory.

Aqua-pro Inc.

Production Budget

For the Quarter

Particulars April May June July Total

Unit Sales 180,000 220,000 200,000 240,000

Add Desired

Ending Inventory 55,000 55,000 60,000 --x---x---x--

Less Opening

Inventory 21,000 55,000 50,000 60,000

Production Units 214,000 215,000 210,000 639,000

Ending Inventory Calculations

April 25% of 220,000= 55,000

May 25% of 200,000= 55,000

June 25% of 240,000 =60,000