Question

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows. Quarter NM + HD-240 5,200 7,150 8,320 10,190 The January 1, 2020, inventory of HD-240 is 2,080 units. Management desires an ending inventory each quarter equal to 40% of the next quarter's sales. Sales in the first quarter of 2021 are expected to be 25% higher than sales in the same quarter in 2020. Prepare quarterly production budgets for each quarter and in total for 2020. TURNEY COMPANY Production Budget For the Year Ending December 31, 2020 Product HD-240 Quarter Year 5200 8320 10190 2912

Answer 1

TURNEY COMPANY
Production Budget
For the year ending December 31, 2020
Product HD-240
	Quarter
	1	2	3	4	Year
Expected unit sales	5200	7150	8320	10190
Add : Desired ending finished goods unit	2860 [ 40% * 7150 ]	3328 [ 40% * 8320 ]	4076 [ 40% * 10190 ]	2600 [ 40% * 6500 ]
Total required units	8060	10478	12396	12790
Less : Beginning finished goods unit	2080	2860	3328	4076
Required production units	5980	7618	9068	8714	31380

Note : Sales unit of first quarter of 2021 = Sales of first quarter of 2020 * ( 1 + 25% ) = 5200 * ( 1 + 25% )

6500