Question

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows. Quarter HD-240 1 5,200 2 7,150 3 8,320 4 10,190 The January 1, 2017, inventory of HD-240 is 2,080 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2018 are expected to be 25% higher than sales in the same quarter in 2017. Prepare quarterly production budgets for each quarter and in total for 2017.

Answer 1

           Answer:

Q1 Production 5,980 batteries

Q2 Production 7,618 batteries

Q3 Production 9,068 batteries

Q4 Production 8,714 batteries

Total production  for the year is 31,380

Explanation:

                               Turney Company 2017 Quarterly Production Budgets

                               Q1 2017  Q2 2017     Q3 2017   Q4 2017      Q1 2018

Sales                            5,200        7,150          8,320      10,190       6,500*

Opening inventory     (2,080)      (2,860)        (3328 )     (4076)       (2600)

Closing inventory        2,860       3328            4076         2600              -

Production required   5,980       7,618              9,068        8,714

Sales in Q1 2018=Q1 2017*(1+25%)

Q1 2017 Sales is 5,200

sales in Q1 2018=5,200*(1+25%)

                         =5,200*(1+0.25)

                        =5,200*1.25

                        =$6500*

Sample calculation of closing inventory=40%*next quarter's sales

Q1 2017 closing inventory =7150*40%=2860                

Q 2 2017 closing inventory =8320*40%=3328

Q 3 2017 closing inventory =10190*40%=4076

Q 4 2017 closing inventory =6,500*40%=2600

Total production for the year =5980+7618+9068+8714

                                                 =31,380