Question

# Brief Exercise 9-3 Paige Company estimates that unit sales will be 10,900 in quarter 1, 12,200...

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 : :

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

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