Question

Sheridan manufactures competition stunt kites. In November, Jerry Box prepared the following production budget for the first quarter of the coming year. Desired ending inventory is based on the following month's budgeted sales.January February March Quarter Budgeted unit Sales 25,000 40,000 30,400 95,400 Budgeted ending inventory 8,000 6,080 2,510 2,510 Total units required 33,000 46,080 32,910 97,910 Beginning inventory 5,000 8,000 6,080 5,000 Budgeted production 28,000 38,080 26,830 92,910 Following higher-than-expected sales in December, Jerry conducted an inventory count on January 2 and discovered that the company had only 2,880 completed kites on hand. He decided that given the brisk sales in December, the company should increase its desired ending inventory level from 20 to 25 percent of the next month's sales volume.(a) Prepare a new production budget for the first quarter. (Round answers to 0 decimal places, e.g. 5,275.)(a) Prepare a new production budget for the first quarter. (Round answers to 0 decimal places, e.g. 5,275.) January February

Answer 1

Explanation:

The preparation of new production budget for the first quarter is shown below:-

Jan Feb March Quarter

Budgeted Sales Units 25,000 40,000 30,400 95,400

Add: Expected Ending

Finished inventory 10,000 7,600 3,138 3,138

Total of Needs 35,000 47,600 33,538 98,538

Less: beginning

inventory (2,880) (10,000) (7,600) (2,880)

Production Budgeted 32,120 37,600 25,938 95,658

Working Note : Desired Ending Finished inventory

For Jan (40,000 × 25%) = 10,000

For Feb (30,400 × 25%) = 7,600

For March (2,510 ÷ 20%) × 25% = 3,138