Question

On December 31, 2017, Waterway had 30 acoustic guitars in stock-fewer than the desired inventory level of 84 guitars, based on the following quarter's sales. The company has budgeted for sales of 240 acoustic guitars in the first quarter of 2019. Prepare the 2018 production budget for acoustic guitars. Production Budget 2nd Quarter 3rd Quarter 1st Quarter 4th Quarter Annual Waterway Enterprises is a boutique guitar manufacturer. The company produces both acoustic and electric guitars for rising and established professional musicians. Vanessa Aaron, the company's sales manager, prepared the following sales forecast for 2018. The forecasted sales prices include a 5% increase in the acoustic guitar price and a 10% increase in the electric guitar price, to cover anticipated increases in raw materials prices. Acoustic guitar sales Electric guitar sales Sales Price $1,200 $2,390 1st Quarter 210 420 2nd Quarter 260 380 3rd Quarter 300 310 4th Quarter 305 340 Prepare Waterway's sales budget for 2018. Sales Budget 3rd Quarter 1st Quarter 2nd Quarter 4th Quarter Annual Acoustic: $ Electric: $ Total revenue Each acoustic guitar requires a maple neck blank, which Waterway purchases for $40. On December 31, 2017, Waterway had 390 neck blanks in inventory. Spoilage during the production process results in a standard quantity of 1.5 necks per acoustic guitar. Because of recent delivery problems, Waterway wants to maintain an ending inventory equal to 50% of the following quarter's production needs. Since the supplier has assured Waterway that the delivery issues will be resolved by the end of December, Waterway wants only 360 neck blanks in inventory on December 31, 2018. Prepare the purchases budget for neck blanks for 2018. (Enter "per guitar" value to 1 decimal place, e.g. 3.1. Round all other answers to decimal places, e.g. 153.) Purchases Budget 2nd Quarter 3rd Quarter 1st Quarter 4th Quarter Annual

Answer 1

solution: Q 1 Q2 Q3 Q4 Annual sales budget Acoustic: Budgeted unit sold Budgeted sales price Budgeted sales revenue 210 1,075 260 1,200 312,000 1,200 252,000 300 1,200 360,000 305 1,200 366,000 1,200 1,290,000 Electric: Budgeted unit sold Budgeted sales price Budgeted sales revenue Total revenue 2 420 2,390 1,003,800 1,255,800 380 2,390 908,200 1,220,200 310 340 2,390 2,390 740,900 812,600 1,100,900 | 1,178,600 1,450 2,390 3,465,500 4,755,500 Q1 Q2 Q3 Q4 260 300 305 210 104 120 122 96 Production budget Budgeted unit sales budgeted ending inventory (*40% of next quarter sales) Total unit required Beginning inventory Budgeted production *84/210=40% Annual 1,075 96 1,171 30 1,141 314 401 380 104 422 120 30 122 284 276 302 279 | Q1 Q2 Q3 Q4 284 1.50 302 1.50 279 1.50 276 1.50 414 227 Annual 1,141 1.50 1,712 360 419 426 207 453 209 360 Purchase budget Budgeted production standard neck per guitar production needs budgeted ending inventory (50% of next quarter production need) Total DM required (necks) Beginning inventory Budgeted purchases (necks) standard price per neck Budgeted purchases cost 633 641 207 779 209 390 243 40 9,720 569 662 227 436 40 17,430 434 40 17,340 2,072 390 1,682 40 67,260 40 22,770