Company is preparing its budget for 4 th quarter of 2013. Ending finished goods

Question

Company is preparing its budget for 4th quarter of 2013. Ending finished goods inventory is required at 20% of current month sales. On October 1, the finished goods inventory had 20,000 units.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Budgeted sales are:

                             October               November                    December

Units sales           120,000               150,000                        180,000

What is the budgeted production level for each month?

Explanation / Answer

Hi,

Please find the answer as follows:

Budgeted Production (October) = 120000*.20 + 120000 - 20000 = 124000

Budgeted Production (November) = 150000*.20 + 150000 - 120000*.20 = 156000

Budgeted Production (December) = 180000*.20 + 180000 - 150000*.20 = 186000

Thanks.

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