Question

Athos Pies produces frozen pies for resale at local grocery stores. The company is currently in the process of establishing a master budget on a quarterly basis for this coming fiscal year, which ends December 31, 2020.  

Prior year (2019) quarterly sales were as follows:

Quarter 1	7,200 pies
Quarter 2	10,500 pies
Quarter 3	8,500 pies
Quarter 4	15,800 pies

In the coming year (2020), pie sales are expected to increase 15% over 2019, and each pie is expected to sell for $5. Management prefers to maintain ending finished goods inventory equal to 8% of next quarter’s sales. Assume desired finished goods inventory at the end of the fourth quarter of 2020 is estimated to be 2,000 pies.

Prepare a production budget in good form for Athos Pies for 2020:

[Provide your answers in the table below.]

	Q1	Q2	Q3	Q4	Total
Pies Needed
Total to Produce

Answer 1

Production budget

	Q1	Q2	Q3	Q4	Total
Sales (units)	7,200	10,500	8,500	15,800	42,000
Plus : Ending inventory of finished goods	10,500 x 8% = 840	8,500 x 8% = 680	15,800 x 8% = 1,264	2,000	4,784
Total finished goods inventory	8,040	11,180	9,764	17,800	46,784
Less : Beginning inventory of finished goods	7,200 x 8% = -576	-840	-680	-1,264	-3,360
Production units	7,464	10,340	9,084	16,536	43,424

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