Question

Prepare the Sales Budget assuming: 1. Expected sales volume: 8,000 units for the first quarter, an increase of 20% is expected for the second quarter, a decrease of 10% for the third quarter, and an increase of 25% for the fourth quarter. 2. The sales price should be $75.00 for the first two quarters and $82.50 for the last two quarters.

Prepare the Production Budget assuming: 1. The company believes it can meet future sales needs with an ending inventory of 25% of the next quarter, for the first two quarters, and 35% of the next quarter, for the last two quarters. 2. The expected sales in units for the first quarter of 2021 is 11,000.

Answer 1

Sales budget $ for the 4 quarters is $ 600,000 $ 720,000 $594000 and $ 825,000

Production Budget in units for the four quarters i s 7997.6 9000 8900 and 10,350 units

Explanation:

Sales Budget

Quarters I II III IV

Sales Volume 8000 9600 7200 10,000

Sales Price $75.00 $75.00 $ 82.50 $82.50

Sales $ 600,000 720,000 594000 825,000

We calculate the sales volume by applying the given percent to the sales units for each quarter. Then multiply it with the sales price to get the sales budget.

Production Budget

Quarters I II III IV

Sales Volume 8000 9600 7200 10,000

+ Desired

Ending Inv. 2400 1800 3500 3850

Less Opening ----- 2400 1800 3500

Production 7997.6 9000 8900 10,350

We find the production budget units by adding the desired ending inventory and subtracting the opening inventory from the sales units calculated above. The ending inventory of one quarter is the opening inventory of the next quarter.As we do not know the ending inventory of the previous year we cannot find the opening inventory of the 1st quarter of the year .