Electro Company manufactures an innovative automobile transmission for electric

Question

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 83,400 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 278,000 units; third quarter, 484,000 units; and fourth quarter, 373,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 30% 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.

Explanation / Answer

Production Budget Second Third total fourth Sale units 278,000 484,000 762,000 373,500 Add:ending iventory 145200 112050 112050 total needs 423,200 596,050 874,050 less:opening inventory 83400 145,200 83,400 production required 339,800 450,850 790,650

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