Fisher Company manufactures cans of Sardines. The sales budget for the first fou

Question

Fisher Company manufactures cans of Sardines. The sales budget for the first four months is as follows:

                                                            Unit Sales (packages)                      Dollar Sales

January                                                             20,000                                   $50,000

February                                                           25,000                                   $75,000

March                                                               30,000                                 $100,000

April                                                                   15,000                                    $30,000

Company policy requires that ending inventories for each month be 20% of next month’s unit sales. That policy was met on January 1.

Prepare a production budget for the first quarter of the year. Make sure you calculate the number of cans produced for the first three months and for the quarter in total.

   Jan                        Feb                       Mar                      Quarter Total

Explanation / Answer

Jan Feb Mar Total Unit sales 20000 25000 30000 75000 Ending Inventory desired 5000   [25000*.20] 6000   [30000*.20] 3000    [15000*.20] 14000 Total units needed 25000 31000 33000 89000 Less:Beginning inventory -4000    [20000*.20] - 5000 -6000 - 15000 Units to be produced 21000 26000 27000 74000

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