E21-4 Prepare quarterly production budgets Turney Company produces and sells aut

Question

E21-4 Prepare quarterly production budgets Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows. Quarter HD-240 1 5,000 2 7,000 3 8,000 4 10,000 The January 1, 2017, inventory of HD-240 is 2,000 units.  Management desires an ending inventory each quarter equal to 40% of the next quarter's sales.  Sales in the first quarter of 2018 are expected to be 25% higher than sales in the same quarter in 2017. Instructions Prepare quarterly production budgets for each quarter and in total for 2017. TURNEY COMPANY Production Budget For the Year Ending December 31, 2017 Product HD-240 Quarter 1 2 3 4 Year Expected unit sales Add:  Desired ending finished goods units Total required units Less:  Beginning finished goods units Required production units Please include the formulas that follow each amount!

Explanation / Answer

Sales for Ist Quarter of 2018 = 10,000 units*1.25 = 12,500 units

Ending Inventory for 4th Quarter of 2017 = 12,500 units*40% = 5,000 units

  TURNEY COMPANY

Production Budget?

  For the Year Ending December 31, 2017 (in units)

Particulars Qtr 1 Qtr 2 Qtr 3 Qtr 4 Year Expected unit sales 5,000 7,000 8,000 10,000 30,000 Add: Desired ending finished goods units (40% of next quarter) 2,800 3,200 4,000 5,000 5,000 Total required units 7,800 10,200 12,000 15,000 35,000 Less: Beginning finished goods units (2,000) (2,800) (3,200) (4,000) (2,000) Required production units 5,800 7,400 8,800 11,000 33,000

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