Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: Sales in Units April 60,000 May 80,000 June 100,000 July 85,000 The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s sales. The inventory at the end of March was 12,000 units. Required: Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Exercise 9-2 Production Budget [LO9-3]
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows:
| Sales in Units | |||
| April | 60,000 | ||
| May | 80,000 | ||
| June | 100,000 | ||
| July | 85,000 | ||
|
|
The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 20% of the following month’s sales. The inventory at the end of March was 12,000 units.
Required:
Prepare a production budget for the second quarter; in your budget, show the number of units to be produced each month and for the quarter in total.
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