Question

Culver Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows.

Quarter		HD-240
1		5,400
2		7,430
3		8,450
4		10,230

The January 1, 2017, inventory of HD-240 is 2,160 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.

Prepare quarterly production budgets for each quarter and in total for 2017.

CULVER COMPANY Production Budget For the Month Ended December 31, 2017For the Year Ending December 31, 2017For the Quarter Ended December 31, 2017
Product HD-240
	Quarter
		1		2		3		4		Year
Beginning Finished Goods UnitBeginning Direct MaterialsTotal Materials RequiredDirect Materials Per UnitRequired Production UnitsTotal Required UnitsDesired Ending Direct MaterialsExpected Unit SalesDirect Materials PurchasesDesired Ending Finished Goods Unit
AddLess : Total Required UnitsDirect Materials Per UnitExpected Unit SalesDirect Materials PurchasesBeginning Finished Goods UnitDesired Ending Finished Goods UnitBeginning Direct MaterialsDesired Ending Direct MaterialsTotal Materials RequiredRequired Production Units
Total Materials RequiredDirect Materials Per UnitBeginning Direct MaterialsDesired Ending Direct MaterialsDesired Ending Finished Goods UnitTotal Required UnitsDirect Materials PurchasesExpected Unit SalesRequired Production UnitsBeginning Finished Goods Unit
AddLess : Beginning Direct MaterialsDirect Materials PurchasesBeginning Finished Goods UnitTotal Required UnitsExpected Unit SalesRequired Production UnitsTotal Materials RequiredDesired Ending Direct MaterialsDesired Ending Finished Goods UnitDirect Materials Per Unit
Direct Materials Per UnitBeginning Direct MaterialsBeginning Finished Goods UnitDesired Ending Direct MaterialsExpected Unit SalesRequired Production UnitsTotal Materials RequiredDesired Ending Finished Goods UnitTotal Required UnitsDirect Materials Purchases

Answer 1

Answer

Production Budget
For the year ended 31 Dec 2017
Product HD-240
	Q1	Q2	Q3	Q4	Year
Expected unit sales	5,400	7,430	8,450	10,230	31,510
Add: Desired ending finished goods	2,972	3,380	4,092	2,700 [(5400 units + 25%) x 40%]	2,700
Total required units	8,372	10,810	12,542	12,930	34,210
Less: Beginning finished goods	2,160	2,972	3,380	4,092	2,160
Required production units	6,212	7,838	9,162	8,838	32,050