Question

Knowledge Check 03 Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What are the production needs for the first quarter? 160,000 bottles 175,000 bottles 195,000 bottles 215,000 bottles

Answer 1

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Beginning inventory= 20,000

Production:

Quarter 1= 200,000

Quarter 2= 150,000

The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate.

To calculate the production budget for the first quarter, we need to use the following formula:

Production budget= sales for the period + desired ending inventory - beginning inventory

Production budget:

Sales= 200,000

Desired ending inventory= (150,000*0.1)= 15,000

Beginning inventory= (20,000)

Production= 195,000 units