Question

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 196,200 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 327,000 units; third quarter, 221,000 units; and fourth quarter, 256,000 units. Company policy calls for the ending finished goods inventory of a quarter to equal 60% of the next quarter's budgeted sales.Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.

Answer 1

Answer:

$\left[\begin{array}{ccc}-&Q2&Q3\\Sales&327,000&221,000\\Ending&132,600&153,600\\Beginning&196,200&132,600\\Production&263,400&242,000\\\end{array}\right]$

Explanation:

Ending: 60% of nex quearter

q3 221,000 x 60% = 132,600 ending of q2 (therefore beginning of q3

q4  256,000 x 60% = 153,600 ending of q3

begining of q2 is ending of q1 196,200

Production:

sales + desired ending inventory - beginning units