Question

qs 20-7 (algo) manufacturing: production budget lo p1

atlantic surf manufactures surfboards. the companys budgeted sales units for the next three months is shown below. company policy is to maintain finished goods inventory equal (in units) to 40% of the next months unit sales. as of june 30, the company has 1,600 finished surfboards in inventory.

budgeted sales units
july: 4,000
august: 6,000
september: 3,500

prepare the production budget for the months of july and august.

Explanation:

Identify the correct next period sales

Using the Budgeted Sales Units and Ending Inventory Policy knowledge points

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LATEXBLOCK0
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Calculate desired ending inventory

Using the Ending Inventory Policy knowledge point

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LATEXBLOCK1
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Determine beginning inventory

Using the Production Budget knowledge point

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LATEXBLOCK2
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Compute units to be produced

Using the Production Budget knowledge point

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LATEXBLOCK3
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Answer:

Item	July	August
Add: Desired ending inventory
Next period budgeted sales units	6,000	3,500
Ratio of inventory to future sales	40%	40%
Desired ending inventory units	2,400	1,400
Total required units	6,400	7,400
Less: Beginning inventory units	1,600	2,400
Units to be produced	4,800	5,000