E 9- 20 Ringer foods products specialty soup is sold in jars the projected sales

Question

E 9- 20 Ringer foods products specialty soup is sold in jars the projected sales in dollars and jars for each quarter are as follows: 1 quarter total sales revenue is $180,000 and the number of jars sold is 150,000, 2 quarter total sales revenue is $216,000 and the number of jars sold is 180,000, 3 quarter total sales revenue is $252,000 and the number of jars sold is 210,000, 4 quarter total sales revenue is $192,000 and the number of jars sold is 160,000.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Ringer anticipates selling 220,000 jars with the total sales revenue of $264,000 in the first quarter of the following year given the information above. Ringer has a policy that the ending inventory of jars must be 25% of the following quarter’s sales. Prepare a production budget for the following year that shows the number of jars to be produced each quarter and for the yearend total

Explanation / Answer

jars to be produced in first quarter is 75% of the quaters sales + 25% of next quarters sales. We only need 75% as 25% comes from the previous quarters

hence

Q1) production = 0.75 * 150000 + 0.25 * 180000 = 157,500

Q2) production = 0.75 * 180000 + 0.25 * 210000 = 187,500

Q3) production = 0.75 * 210000 + 0.25 * 160000 = 197,500

Q4) production = 0.75 * 160000 + 0.25 * 220000 = 175,000

Net production for the year = 157500 + 187500 + 197500 + 175000 = 717,500

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