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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Preparing a Production Budget

Patrick Inc. makes industrial solvents. In the first 4 months of the coming year, Patrick expects the following unit sales:

Chapter 9, Problem 22BEA, Preparing a Production Budget Patrick Inc. makes industrial solvents. In the first 4 months of the

Patrick’s policy is to have 25% of next month’s sales in ending inventory. On January 1, it is expected that there will be 6,700 drums of solvent on hand.

Required:

Prepare a production budget for the first quarter of the year. Show the number of drums that should be produced each month as well as for the quarter in total.

To determine

Prepare production budget showing number of drums for each month and for the quarter in total.

Explanation

Production Budget:

Production budget is a part of operating budget and it is prepared on the basis of sales budget. Production budget is prepared by adding units required in ending inventory and subtracting units available in the beginning inventory to the expected sales units.

Production budget showing number of drums for each month and for the quarter in total:

Particulars

January

($)

February

($)

March

($)

Total

($)

Expected sales units41,00038,00050,000129,000
Add: Closing inventory(25%×38</

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