Problem 1

A firm has the following budgeted sales (in units):

April 50,000 May 75,000

June 90,000 July 80,000

Each unit sells for $33. The firm is trying to schedule production for the 2^nd quarter. Past experience has shown that, to avoid outages, ending inventory must equal 20% of the next months sales. This is exactly the amount of inventory on hand at the end of March. Prepare a sales budget and production budget for the 2^nd quarter.