Question

1. The forecasted sales pertain to Peterson, Inc.:

Fiscal Period	Sales
Quarter 1	$ 400,000
Quarter 2	500,000
Quarter 3	300,000
Quarter 4	200,000
Quarter 1 of next year	900,000

Collection pattern: 60 percent in month of sale; 40 percent in month following the sale

Accounts Receivable (Beginning Quarter 1)                                                             : $70,000

Number of Units in Finished Goods Inventory (Beginning Quarter 1): 4,000

All company sales are for $20 per unit. The company plans to maintain ending inventories equal to 20 percent of the next quarter's sales.

How many units does Peterson expect to produce in Quarters 1 through 4?

Answer 1

Expected production of Quarter 1

Budgeted sales + Ending inventory - Beginning Inventory

= (400000/20)+((500000/20)*20%)-4,000

= 20,000+5,000-4,000

= 21,000 units

Expected production of Quarter 2

= (500000/20)+((300000/20)*20%)-5,000

= 25,000+3,000-5,000

= 23,000 units

Expected production of Quarter 3

= (300000/20)+((200000/20)*20%)-3,000

= 15,000+2,000-3,000

= 14,000 units

Expected production of Quarter 4

= (200000/20)+((900000/20)*20%)-2,000

= 10,000+9,000-2000

= 17,000 units

(Previous Quarters Ending Inventory will be the Beginning inventory of next Quarter)