Question

Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Production in units for the third quarter should be budgeted at Group of answer choices

Answer 1

Answer:

Bear, Inc.

Production in units for the third quarter should be budgeted at:

= 245,000 units

Explanation:

a) Data and Calculations:

Estimated sales units = 200,000

Estimated increase in sales each quarter = 20,000

Desired ending inventory = 25%

Sales price per unit = $35

Cash sales = 40%

Credit sales = 60% (100 - 60%)

Cash collection:

70% quarter of sales

30% quarter following

                           1st Quarter 2nd Quarter 3rd Quarter 4th Quarter  Total

Sales unts            200,000     220,000      240,000     260,000   920,000

Ending inventory   50,000       55,000         60,000       65,000     65,000

Units available    250,000      275,000      300,000     325,000   985,000

Beginning

inventory                                  50,000        55,000       60,000    0

Production          250,000     225,000      245,000    265,000    985,000