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VitaPup produces a vitamin-enhanced dog food that is sold in Kansas. The company expects sales to be 13,400 bags in January, 14,300 bags in February, 13,100 bags in March, and 15,700 bags in April. There are 1,340 bags on hand at the start of January. VitaPup desires to maintain monthly ending inventory equal to 15 percent of next month’s expected sales.

Prepare the production budget for VitaPup for the months of January, February, and March. VitaPup Production Budget For the months of January, February, and March January February March Quarter : :

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Answer:

                                      PRODUCTION BUDGET

                                     JANUARY FEBRUARY MARCH

Sales                                13,400      14,300       13,100

Add: Closing stock            2,145       1,965        2,255

                                          15,545      16,265      15,355

Less: Opening stock          1,340        2,145         1,965

Production budget             14,205      14,120        13,390              

Calculation of closing stock:

January    15% x 14,300 bags = 2,145 bags

February   15% x 13,100 bags = 1,965 bags

March        15% x 15,700 bags = 2,355 bags

Explanation:

Production budget = Sales + Closing stock - Opening stock

The closing stock for January is the opening stock for February and the closing stock for February is the opening stock for march.

Closing stock is 15% of next month sales. For instance, the closing stock for January is 15% of February sales, the closing stock for February is 15% of March sales and the closing stock for March is 15% of April sales.

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