Question

Spirit Company's sales budget shows quarterly sales for the next year as follows: Unit sales Quarter 1.......... 10,000 units Quarter 2.......... 8,000 units Quarter 3.......... 12,000 units Quarter 4.......... 14,000 units Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be:

Answer 1

8,800 units

Step-by-step explanation:

Calculation to determine what Budgeted production for the second quarter of the next year would be:

Second Quarter - Sales 8,000

Less: Beginning Finished Goods

(8,000 x 20%) (1,600)

Add: Desired Ending Finished Goods (12,000 x 20% ) 2,400

Budgeted Production 8,800 units

(8,000-1,600+2,400)

Therefore Budgeted production for the second quarter of the next year would be:8,800 units