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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

Tulum Inc. makes a Mexican chocolate mix. In the first 4 months of the coming year, Tulum expects the following unit sales:

Chapter 9, Problem 36BEB, Preparing a Production Budget Tulum Inc. makes a Mexican chocolate mix. In the first 4 months of the

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.

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:

ParticularsJanuary ($)February ($)

March

($)

Total

($)

Expected sales units22,00020,00030,00072,000
Add: Closing inventory 14,0006,0006,20016,200
Less: Opening inventory1,3004,0006,00011,300
Units to be produced24,70022,00030,200

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