Question

Oriole 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. Budgeted unit Sales Budgeted ending inventory Total units required Beginning inventory Budgeted production January February March 23,800 35,200 30,700 7,040 6,140 2,610 30,840 41,340 33,310 4,760 7 ,040 6,140 26,080 34,300 27,170 Quarter 89,700 2,610 92,310 4,760 87,550 Following higher-than-expected sales in December, Jerry conducted an inventory count on January 2 and discovered that the company had only 2,930 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.) January February March Quarter 2 Budgeted unit sales v 23800 35200 30700 89700 Budgeted ending inventory v 8800 7675 22425 Total units required 32600 42875 Beginning inventory Budgeted production V

Answer 1

Answer with working notes is given below

Purchase Budget Budgeted Unit Sales Budgeted Ending Inventory Total units required Beginning Inventory | Budgeted Production | January 23,800 8,800 32,600 2,930 29,670 February 35,200 7,675 42,875 8,800 34,075 March 30,700 3,263 33,963 7,675 26,288 Quarter 89,700 3,263 92,963 2,930 90,033 Working note: 2,610 April production Existing Inventory Existing Inventory % April production 20% 13,050 (2,610/20%) Revised Inventory % March ending inventory Rounded off to 25% 3,262.50 (13,050 * 25%) 3,263