Question

Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Production in units for the third quarter should be budgeted at Group of answer choices

Answer 1

Bear, Inc.

Production in units for the third quarter should be budgeted at:

= 245,000 units

Step-by-step explanation:

a) Data and Calculations:

Estimated sales units = 200,000

Estimated increase in sales each quarter = 20,000

Desired ending inventory = 25%

Sales price per unit = $35

Cash sales = 40%

Credit sales = 60% (100 - 60%)

Cash collection:

70% quarter of sales

30% quarter following

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

Sales unts 200,000 220,000 240,000 260,000 920,000

Ending inventory 50,000 55,000 60,000 65,000 65,000

Units available 250,000 275,000 300,000 325,000 985,000

Beginning

inventory 50,000 55,000 60,000 0

Production 250,000 225,000 245,000 265,000 985,000