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Sheridan Company estimates its sales at 150000 units in the first quarter and that sales will...

Sheridan Company estimates its sales at 150000 units in the first quarter and that sales will increase by 15000 units each quarter over the year. They have, and desire, a 25% ending inventory the current month’s sales. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.

Production in units for the third quarter should be budgeted at

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Answer #1

Estimated sales for third quarter = 150000 + 15000 + 15000 = 180000 units

Ending Inventory = 25% of current month sale

Assume sale is equal in 3 month of quarter

Hence = 180000/3 * 25% = 15000 units

Beginning Inventory:-

2nd quarter sale = 150000 + 15000 = 165000 units

Hence = 165000/3 * 25% = 13750 units

Production = Estimated sale + Ending Inventory - Beginning Inventory

180000 + 15000 - 13750 = 181250 units

If you think about ending inventory is 25 % of Quarter sale

then please read question

In question Ending inventory = 25% of month sale not quarter sale

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