Question

Tyler Co. predicts the following unit sales for the next four months: April, 3,100 units; May, 4,900 units; June, 7,000 units; and July, 2,800 units. The company’s policy is to maintain finished goods inventory equal to 30% of the next month’s sales. At the end of March, the company had 600 finished units on hand. Prepare a production budget for each of the months of April, May, and June.

Answer 1

Production Budget April 3970 May 5530 June 5740 units

Step-by-step explanation:

Tyler Co.

Production Budget

For the months of April, May, and June.

Particulars April, May, June July

Sales 3100 4900 7000 2800(given)

+ Desired Ending Inv. 1470 2100 840

Less Beginning Inv. 600 1470 2100

Production Budget 3970 5530 5740

The Production budget is calculated by adding sales to the desired ending inventory and subtracting the beginning inventory from it. Each month's ending inventory is next month's beginning inventory.

The Ending Inventory is calculated by taking 30% of the next months' sales.

Ending Inventory for April = 4900*30%=1470

Ending Inventory for May = 7000*30%=2100

Ending Inventory for April = 2800*30%=840