Answer:
January:
we start with expected sales (10,000 units) and then we must add ending inventory (20% of February's expected sales = 12,000 x 20% = 2,400) minus beginning inventory of finished parts (20% of January's expected sales = 10,000 x 20% = 2,000).
= 10,000 + 2,400 - 2,000 = 10,400 units
February:
again we start with expected sales (12,000 units) and then we must add ending inventory (20% of March's expected sales = 13,000 x 20% = 2,600) minus beginning inventory of finished parts (2,400 from January).
= 12,000 + 2,600 - 2,400 = 12,200 units
<u>production budget finished 198z parts</u>
January February
Expected sales in units 10,000 12,000
<u>+ ending inventory 2,400 2,600 </u>
subtotal 12,400 14,600
<u>- beginning inventory (2,000) (2,400) </u>
required production units 10,400 12,200