Question

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows. Quarter HD-240 1 5,200 2 7,150 3 8,320 4 10,190 The January 1, 2017, inventory of HD-240 is 2,080 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2018 are expected to be 25% higher than sales in the same quarter in 2017. Prepare quarterly production budgets for each quarter and in total for 2017.

Answer 1

Answer:

Q1 Production 5,980 batteries

Q2 Production 7,618 batteries

Q3 Production 9,068 batteries

Q4 Production 8,714 batteries

Total production for the year is 31,380

Step-by-step explanation:

Turney Company 2017 Quarterly Production Budgets

Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

Sales 5,200 7,150 8,320 10,190 6,500*

Opening inventory (2,080) (2,860) (3328 ) (4076) (2600)

Closing inventory 2,860 3328 4076 2600 -

Production required 5,980 7,618 9,068 8,714

Sales in Q1 2018=Q1 2017*(1+25%)

Q1 2017 Sales is 5,200

sales in Q1 2018=5,200*(1+25%)

=5,200*(1+0.25)

=5,200*1.25

=$6500*

Sample calculation of closing inventory=40%*next quarter's sales

Q1 2017 closing inventory =7150*40%=2860

Q 2 2017 closing inventory =8320*40%=3328

Q 3 2017 closing inventory =10190*40%=4076

Q 4 2017 closing inventory =6,500*40%=2600

Total production for the year =5980+7618+9068+8714

=31,380