Genever and Bruton Limited are preparing a production budget for the three-month period covering March, April and May 20X4.Sales budgets are as follows: The company has a policy of holding closing inventory of finished goods at 60% of the next following month's sales levels.
What is the total production budget in units for the three-month period?

Question

Genever and Bruton Limited are preparing a production budget for the three-month period covering March, April and May 20X4.Sales budgets are as follows:  The company has a policy of holding closing inventory of finished goods at 60% of the next following month's sales levels.
What is the total production budget in units for the three-month period?

Quizplus · Accepted Answer

To calculate the total production budget, we need to take into account the desired ending inventory level of finished goods as well as the expected sales levels.

First, let's calculate the desired ending inventory levels for each month:

- April ending inventory = 60% of May sales = 4,800 x 60% = 2,880 units
- May ending inventory = 60% of June sales = 5,200 x 60% = 3,120 units

Next, let's calculate the total production needed to meet both the expected sales and desired ending inventory levels:

- March production = March sales + April ending inventory - March beginning inventory = 3,000 + 0 - 750 = 2,250 units
- April production = April sales + May ending inventory - April beginning inventory = 4,800 + 2,880 - 1,215 = 6,465 units
- May production = May sales + June ending inventory - May beginning inventory = 5,200 + 3,120 - 1,485 = 6,835 units

Total production budget = March production + April production + May production = 2,250 + 6,465 + 6,835 = 15,770 units.

Therefore, the correct answer is C) 15,770.

Genever and Bruton Limited Are Preparing a Production Budget for the Three-Month