Question

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows. Quarter HD-240 1 5,500 2 7,420 3 8,260 4 10,130 The January 1, 2020, inventory of HD-240 is 2,200 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2021 are expected to be 25% higher than sales in the same quarter in 2020. Prepare quarterly production budgets for each quarter and in total for 2020.

Answer 1

Answer:

Explanation:

                         1                 2             3             4           5

sales             15500        7420        8260    10130   19220

Inventory     2200

Ending

inventory     2968          3304         4052       7688

Production  16,268       7756          9008     13766

Total production = 46,798

Workings

Ending  inventory

Quarter 1  =40%*7420

Quarter 2 40%*8260= 3304

Quarter 3 40%*10130=4052

Quarter 4 40%* 19220=7688

Production formula

Quarterly sales + ending inventory - opening inventory

Please note that the ending inventory of a quarter is the opening inventory of the next quarter