Wellstone Company estimates that 2011 unit sales will be 15,900 in quarter 1, 22
ID: 2349055 • Letter: W
Question
Wellstone Company estimates that 2011 unit sales will be 15,900 in quarter 1, 22,300 in quarter 2, and 28,200 in quarter 3, at a unit selling price of $24. Management desires to have ending finished goods inventory equal to 11% of the next quarter's expected unit sales. Prepare a production budget by quarter for the first 6 months of 2011.(Enter all amounts as positive amounts and subtract where necessary.)
For the Six Months Ending June 30, 2011
Quarter
1
2
Months
WELLSTONE COMPANY Production BudgetFor the Six Months Ending June 30, 2011
Quarter
Six1
2
Months
Beginning finished goods inventoryExpected unit salesTotal required unitsDesired ending finished goods inventory Add: Beginning finished goods inventoryDesired ending finished goods inventoryTotal required unitsExpected unit sales Expected unit salesBeginning finished goods inventoryTotal required unitsDesired ending finished goods inventory Less: Total required unitsExpected unit salesBeginning finished goods inventoryDesired ending finished goods inventory Required production unitsExplanation / Answer
quarter 1
quarter 2
6 months
Expected unit sales
15900
22300
38200
add: desired ending fg inventory
2453
3102
3102
total required units
18353
25402
41302
less: beginning fg inventory
1749
2453
1749
required production units
16604
22949
39553
Some calculations:
Desired ending inventory:
Q1: .11*22300
Q2: .11*28200
6 months: same as Q2
Beginning inventory:
Q1: .11*15900
Q2: .11*22300
6 months: same as Q1
quarter 1
quarter 2
6 months
Expected unit sales
15900
22300
38200
add: desired ending fg inventory
2453
3102
3102
total required units
18353
25402
41302
less: beginning fg inventory
1749
2453
1749
required production units
16604
22949
39553
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