Question

E10.19 Prepare quarterly production budgets. (LO 2) Wayans Company produces and sells automobile batteries, including the heavy-duty HD-240. The 2020 sales budget is as follows: Quarter Units of HD-240 1 6,000 7,000 9,000 10,000 The January 1, 2020, inventory of HD-240 is 1,500 units. Management wants an ending inventory each quarter that is equal to 30% of the next quarter's sales. It expects sales in the first quarter of 2021 to be 20% higher than sales in the same quarter in 2020. Instructions Prepare quarterly production budgets for each quarter for 2020.

Answer 1

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Sales units	6,000	7,000	9,000	10,000
Ending inventory of finished goods	7,000 x 30% = 2,100	9,000 x 30 % = 2,700	10,000 x 30% = 3,000	7,200 x 30% = 2,160
Total inventory needed	8,100	9,700	12,000	12,160
Beginning inventory of finished goods	-1,500	-2,100	-2,700	-3,000
Production needed	6,600	7,600	9,300	9,160

Sales during first quarter of next year = 6,000 x 120%

= 7,200

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