Question

Sheridan manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first quarter of the coming year. Desired ending inventory is based on the following month's budgeted sales.January February March Quarter Budgeted unit Sales 25,000 40,000 30,400 95,400 Budgeted ending inventory 8,000 6,080 2,510 2,510 Total units required 33,000 46,080 32,910 97,910 Beginning inventory 5,000 8,000 6,080 5,000 Budgeted production 28,000 38,080 26,830 92,910 Following higher-than-expected sales in December, Jerry conducted an inventory count on January 2 and discovered that the company had only 2,880 completed kites on hand. He decided that given the brisk sales in December, the company should increase its desired ending inventory level from 20 to 25 percent of the next month's sales volume.(a) Prepare a new production budget for the first quarter. (Round answers to 0 decimal places, e.g. 5,275.)(a) Prepare a new production budget for the first quarter. (Round answers to 0 decimal places, e.g. 5,275.) January February

Answer 1

Explanation:

The preparation of new production budget for the first quarter is shown below:-

                                       Jan           Feb          March      Quarter

Budgeted Sales Units    25,000   40,000     30,400      95,400

Add: Expected Ending    

Finished inventory           10,000    7,600         3,138       3,138  

Total of Needs                35,000    47,600      33,538      98,538

Less: beginning

inventory                        (2,880)       (10,000)    (7,600)      (2,880)

Production Budgeted    32,120        37,600     25,938      95,658

Working Note : Desired Ending Finished inventory  

For Jan (40,000 × 25%) = 10,000

For Feb (30,400 × 25%) = 7,600

For March (2,510 ÷ 20%) × 25% = 3,138