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​17,000Second quarter budgeted jump rope sales in units​20,000Third quarter budgeted jump rope sales in units​20,000Fourth quarter budgeted jump rope sales in units​25,000Inventory at the beginning of the year was​ 4,500 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

Totz Company should produce 16,500 jump ropes during the first quarter.

Step-by-step explanation:

To calculate the number of jump ropes Totz Company should produce during the first quarter, we follow these steps:

• Calculate the desired ending inventory for the first quarter, which is 20% of the second quarter's sales. 20% of 20,000 units (second quarter sales) equals 4,000 units.
• Add the desired ending inventory to the sales for the first quarter, then subtract the beginning inventory to find the production amount.

(20,000 units * 20%) + 17,000 units - 4,500 units = 4,000 units + 17,000 units - 4,500 units = 16,500 units to be produced in the first quarter.

Answer 2

Production budget for First quarter= 16,500 units

Step-by-step explanation:

The production budgeted for a particular period is the expected units to be produced after adjusting the sales budget figures for opening and closing inventories.

Production = Sales volume + closing inventory - opening inventory

Closing inventory = 20% × second quarter sales

= 20% × 20,000 = 4,000 units

Production budget for the first quarter

=17,000 + 4000 -4500

= 16,500 units