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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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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:

Chapter 9, Problem 53E, Production Budget Aqua-Pro Inc. produces submersible water pumps for ponds and cisterns. The unit

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.

Required:

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.

To determine

Make production budget for the year.

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.

Presentation of production budget:

ParticularsUnits
April:
Expected sales180,000
Add: Closing units (25%×220,000) 55,000
Less: Opening units (given)21,000
Expected Production (1)214,000
May:
Expected sales220,000
Add: Closing units (25%×200,000)

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