Question

Brief Exercise 9-3 Paige Company estimates that unit sales will be 10,900 in quarter 1, 12,200 in quarter 2, 14,200 in quarter 3, and 18,200 in quarter 4. Management desires to have an ending finished goods inventory equal to 25% of the next quarter’s expected unit sales. Prepare a production budget by quarters for the first 6 months of 2020. PAIGE COMPANY Production Budget Quarter 1 2 Six Months : :

Answer 1

SOLUTION

Production Budget-

	Quarter 1	Quarter 2	Six months
Expected Unit Sales	10,900	12,200	23,100
Plus: Desired Ending Finished Goods Inventory	3,050	3,550	3,550
Total Required Units	13,950	15,750	26,650
Less: Beginning Finished Goods Inventory	(2,725)	(3,050)	(2,725)
Required Production Units	11,225	12,700	23,925

Ending Finished Goods Inventory = 25% * Next quarter’s expected unit sales

Quarter 1 = 25% * 12,200 = 3,050

Quarter 2 = 25% * 14,200 = 3,550

Beginning Finished Goods Inventory-

Quarter 1 = 25% * 10,900 = 2,725