Question

Totz Company produces jump ropes. Totz Company has the following sales projections for the upcoming year: First quarter budgeted jump rope sales in units 15,000 Second quarter budgeted jump rope sales in units 35,000 Third quarter budgeted jump rope sales in units 25,000 Fourth quarter budgeted jump rope sales in units 33,000 Inventory at the beginning of the year was 4,100 jump ropes. Totz Company wants to have 20% of the next quarter's sales in units on hand at the end of each quarter. How many jump ropes should Totz Company produce during the first quarter?

Answer 1

Production budget 17,900

Step-by-step explanation:

First, we will calculate the units requirement, that will be the sales for the quarter and the desired ending inventory:

sales of Q1 15,000

desired ending 20% of Q2 sales

20% x 35,000 = 7,000

Total requirement 22,000

Next we subtract the beginning inventory, because those units are already produced, so it decrease our production needs

Total requirement 22,000

beginning inventory (4,100)

Production budget 17,900