Question

BULL Company has budgeted the following unit sales: 2017 2016 Quarter Units Quarter Units 1 105,000 1 90,000 2 60,000 3 75,000 4 120,000 The finished goods inventory on hand on December 31, 2015 was 21,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's anticipated sales. Instructions Prepare a production budget for 2016.

Answer 1

357,000

Step-by-step explanation:

Preparation of a production budget for 2016

BULL COMPANY Production Budget For

2016

Quarter

1 2 3 4

Expected unit sale

105,000 60,000 75,000 120,000

Desired ending finished goods units

12,000 15,000 24,000 18,000

Total required units

117,000 75,000 99,000 138,000

Less: Beginning finished goods units

21,000 12,000 15,000 24,000

Required production units

96,000 63,000 84,000 114,000

Total =357,000

(96,000 + 63,000 + 84,000 +114,000)

Calculation for Desired ending finished goods units

20%×60,000 units =12,000

20%×75,000 units =15,000

20%×120,000 units =24,000

20%×90,000 units =18,000

Total required units=Expected unit sales+Desired ending finished goods units

Calculation for Beginning finished goods units

December 31, 2015 =21,000 units

20%×60,000 units =12,000

20%×75,000 units =15,000

20%×120,000 units =24,000

Required production units=Total required units-Beginning finished goods units