Preparing a Production Budget Patrick Inc makes industrial s

Preparing a Production Budget

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

Patrick\'s policy is to have 24% of next month\'s sales in ending inventory. On January 1, it is expected that there will be 4,600 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. If required, round your answers to the nearest whole unit.

January	41,000
February	38,000
March	50,000
April	51,000

Solution

Patrick Inc Production Budget January February March Quarter Budgeted unit sales                              41,000                                38,000                                50,000                              129,000 Add: Desired Ending inventory 38,000*24% = 9,120 50,000*24% = 12,000 51,000*24% = 12,240 51,000*24% = 12,240 Total needs                              50,120                                50,000                                62,240                              141,240 Less: Beginning inventory                                4,600 38,000*24% = 9,120 50,000*24% = 12,000                                   4,600 Required production in units                              45,520                                40,880                                50,240                              136,640