Preparing a Production Budget Tulum Inc. makes a Mexican chocolate mix. In the first 4 months of the coming year, Tulum expects the following unit sales: January 22,000 February 20,000 March 30,000 April 31,000 Tulum’s policy is to have 20% of next month’s sales in ending inventory. On January 1, it is expected that there will be 1,300 boxes of the chocolate mixture on hand. Required: Prepare a production budget for the first quarter of the year. Show the boxes that should be produced each month as well as for the quarter in total.

Explanation:

The preparation of the production budget for the first quarter of the year is presented below:

                                              Tulum Inc.

                                     Production Budget

                                For the Coming Quarter

                           JanuaryFebruary       March1st Quarter Total

Sales             22,00020,000       30,00072,000

Desired

ending inventory 4,0006,000      6,200          6,200

  (20,000 ×20%)   (30,000 ×20%)   (31,000 ×20%)

Total needs    26,00026,000     36,200  78,200

Less:

Beginning inventory  1,3004,000     6,000           1,300

Units to

be produced          24,70022,000    30,200  76,900

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