Question

Vaughn 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. Sales Price 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Acoustic guitar sales $1,200 190 250 310 325 Electric guitar sales $2,350 400 370 300 370 Each acoustic guitar requires a maple neck blank, which Vaughn purchases for $45. On December 31, 2017, Vaughn had 410 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, Vaughn wants to maintain an ending inventory equal to 50% of the following quarter’s production needs. Since the supplier has assured Vaughn that the delivery issues will be resolved by the end of December, Vaughn wants only 350 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 0 decimal places, e.g. 153.)

Answer 1

	Purchase budget:
						1st quarter	2nd quarter	3rd quarter	4th quarter	Total
	Forecasted sales of Acoustic guitar				a	190	250	310	325
	Standard quantity of necks per acoustic guitar				b	1.5	1.5	1.5	1.5
	Total necks required				c=a*b	285	375	465	487.5
	Add: Desired ending inventory					187.5	232.5	243.75	350
	(Total necks required for the next quarter*50%)					(375*50%)	(465*50%)	(487.5*50%)	(given)
						472.5	607.5	708.75	837.5
	Less: Beginning inventory					410	187.5	232.5	243.75
	(Ending inventory of previous quarter)					(given)
	Necks to be purchased					62.5	420	476.25	593.75
	Purchase price per neck					45	45	45	45
	Budgeted purchase in $					2813	18900	21431	26719	69863