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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
Preparing a Production Budget
Tulum Inc. makes a Mexican chocolate mix. In the first 4 months of the coming year, Tulum expects the following unit sales:
Tulum’s policy is to have 20% of next month’s sales in ending inventory. On January 1, it is expected that there will be 1,300 boxes of the chocolate mixture on hand.
Required:
Prepare a production budget for the first quarter of the year. Show the boxes that should be produced each month as well as for the quarter in total.
Prepare production budget showing number of drums for each month and for the quarter in total.
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 units | 22,000 | 20,000 | 30,000 | 72,000 |
| Add: Closing inventory 1 | 4,000 | 6,000 | 6,200 | 16,200 |
| Less: Opening inventory | 1,300 | 4,000 | 6,000 | 11,300 |
| Units to be produced | 24,700 | 22,000 | 30,200 |
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