Question

Grant Co.'s sales budget shows the following projections for the year ending December 31:

Quarter -----Units
First --------30,000
Second ----40,000
Third -------22,500
Fourth -----27,500
Total ------120,000

Inventory at the beginning of the year was budgeted at 9,000 units. The quantity of finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted sales of units. What amount should the production budget show for units to be produced during the first quarter?

A.36,000
B.33,000
C.24,000
D.12,000

Answer 1

To calculate the units to be produced in the first quarter, add the required ending inventory of 12,000 units to the sales of 30,000 units, and subtract the beginning inventory of 9,000 units, resulting in 33,000 units to be produced.

Step-by-step explanation:

To determine the number of units to be produced in the first quarter for Grant Co., we will follow these steps:

1. Calculate the required ending inventory for the first quarter, which is 30% of the second quarter's sales. This amounts to 0.30 × 40,000 units = 12,000 units.
2. Add the required ending inventory for the first quarter to the sales for the first quarter. This gives us 12,000 units + 30,000 units = 42,000 units.
3. Subtract the beginning inventory from the sum of sales and required ending inventory for the first quarter. This results in 42,000 units - 9,000 units = 33,000 units to be produced in the first quarter.

Therefore, the production budget should show that 33,000 units are to be produced during the first quarter.