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Drones Ltd
Drones
Ltd. produces and sells “
Skyview
”. The following information
is an extract from the
sales forecast report :
The fore
casted sales for the months of
Apr
to
May
202
1
are as follows :
-
Apr : 55,000 units
May : 58,000 units
The management of
Drones
has proposed to set a target ending finished goods for each
month at
30
% of the following month’s sales.
Drones
estimates
that sales will increase by
3,000 units
(from the number of units sold in
May
) for the month of Ju
ne
.
Required :
(a)
Compute the following (show workings using a production budget or other means) :
(i)
Budgeted production (units) for the month of
Apr
202
1
.
(3 ma
rks)
(ii)
Target ending finished goods (units) for
May
202
1
Expert Solution
| Production Budget: | ||
| April | May | |
| Budgeted Sales | 55,000 | 58,000 |
| Add: Ending Inventory | 17400 | 18300 |
| Total Needs | 72,400 | 76300 |
| Less: Beginning Inventory | 16500 | 17400 |
| Production Budget | 55900 | 58900 |
| Production Budget: | ||
| April | May | |
| Budgeted Sales | 55000 | 58000 |
| Add: Ending Inventory | =58000*30% | =(58000+3000)*30% |
| Total Needs | =55000+17400 | =58000+18300 |
| Less: Beginning Inventory | =55000*30% | 17400 |
| Production Budget | =72400-16500 | =76300-17400 |
(i) Budgeted production (units) for the month of Apr 2021 = 55,900
(ii) Target ending finished goods (units) for May 2021 = 18,300
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