September 40,000 1,201,000 October 36,000 1,143,200 Company policy requires that ending inventories for each month be

Question

September 40,000 1,201,000 October 36,000 1,143,200 Company policy requires that ending inventories for each month be 20 percent of next month's sales. At the beginning of July, of consumer products met that policy. Required: Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as in total Palmgren Company Production Budget For the Third Quarter July August September Total Unit sales 30,500 34.000 10,000 104,500 ? ? ? Total needed Units produced

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Palmgren Company Production Budget For the Third Quarter July August September Total Unit sales 30,500 34,000 40,000 104,500 Desired ending inventory [Refer working note 1] 6,800 8,000 7,200 22,000 Total needed 37,300 42,000 47,200 126,500 Less: Beginning inventory [Refer working note 2] 6,100 6,800 8,000 20,900 Units produced 31,200 35,200 39,200 105,600 . . Working Note 1 - Calculation of desired ending inventory For July [Next month sales x 20% = August sales x 20% = 34,000 x 20%] 6,800 units For August [Next month sales x 20% = September sales x 20% = 40,000 x 20%] 8,000 units For September [Next month sales x 20% = October sales x 20% = 36,000 x 20%] 7,200 units . . Working Note 2 - Beginning inventory For July [Ending inventory for June = Next month sales x 20% = July sales x 20% = 30,500 x 20%] 6,100 units For August [Ending inventory for July] 6,800 units For September [Ending inventory for August] 8,000 units

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September 40,000 1,201,000 October 36,000 1,143,200 Company policy requires that ending inventories for each month be 20 percent of next month's sales

Expert Solution

Archived Solution

Palmgren Company
Production Budget
For the Third Quarter
	July	August	September	Total
Unit sales	30,500	34,000	40,000	104,500
Desired ending inventory [Refer working note 1]	6,800	8,000	7,200	22,000
Total needed	37,300	42,000	47,200	126,500
Less: Beginning inventory [Refer working note 2]	6,100	6,800	8,000	20,900
Units produced	31,200	35,200	39,200	105,600

Working Note 1 - Calculation of desired ending inventory
For July [Next month sales x 20% = August sales x 20% = 34,000 x 20%]	6,800	units
For August [Next month sales x 20% = September sales x 20% = 40,000 x 20%]	8,000	units
For September [Next month sales x 20% = October sales x 20% = 36,000 x 20%]	7,200	units

Working Note 2 - Beginning inventory
For July [Ending inventory for June = Next month sales x 20% = July sales x 20% = 30,500 x 20%]	6,100	units
For August [Ending inventory for July]	6,800	units
For September [Ending inventory for August]	8,000	units