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8 July, 09:17

Production Budget Aqua-pro Inc. produces submersible water pumps for ponds and cisterns. The unit sales for selected months of the year are as follows: Unit Sales April 180,000 May 220,000 June 200,000 July 240,000 Company policy requires that ending inventories for each month be 25% of next month's sales. However, at the beginning of April, due to greater sales in March than anticipated, the beginning inventory of water pumps is only 21,000. Prepare a production budget for the second quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.

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  1. 8 July, 09:38
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    Production Budget April 214,000

    Production Budget May 215,000

    Production Budget June 210,000

    Production Budget Total 639,000

    Explanation:

    We use the formula to calculate the production budget

    Production = Sales + Ending Inventory - Opening Inventory.

    Aqua-pro Inc.

    Production Budget

    For the Quarter

    Particulars April May June July Total

    Unit Sales 180,000 220,000 200,000 240,000

    Add Desired

    Ending Inventory 55,000 55,000 60,000 - -x---x---x--

    Less Opening

    Inventory 21,000 55,000 50,000 60,000

    Production Units 214,000 215,000 210,000 639,000

    Ending Inventory Calculations

    April 25% of 220,000 = 55,000

    May 25% of 200,000 = 55,000

    June 25% of 240,000 = 60,000
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