Question

Betz Company's sales budget shows the following projections for next year: Inventory at the beginning of the year was 18,000 units. The finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted unit sales. How many units should be produced during the first quarter

Answer 1

Question

Betz Company's sales budget shows the following projections for next year:

Sales in Units: 1st Quarter = 60,000; 2nd Quarter = 80,000; 3rd Quarter = 45,000; 4th Quarter = 55,000

Inventory at the beginning of the year was 18,000 units. The finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted unit sales. How many units should be produced during the first quarter

Answer:

Production budget = 66,000 units

Explanation:

The expected units of a product that a business estimates to manufacture given its sales budget and inventory is known as the production budget.

The production budget can bed determined by adjusting the sales budget for closing and opening inventories.

Production budget = Sales budget +closing inventory - opening inventory

Opening inventory = 18,000

Closing Inventory units = 30% × 2nd quarter budget

Inventory units = 30% × 80,000=

Production budget = 60,000 + 24,000 - 18,000=66,000 units

Production budget = 66,000 units