Question

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2017 sales forecast is as follows. Quarter HD-240 1 5,200 2 7,220 3 8,280 4 10,180 The January 1, 2017, inventory of HD-240 is 2,080 units. Management desires an ending inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of 2018 are expected to be 25% higher than sales in the same quarter in 2017. Prepare quarterly production budgets for each quarter and in total for 2017.

Answer 1

Turney Company

Production Budget

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Budgeted unit sales	5,200	7,220	8,280	10,180	30,880
Desired ending inventory units	2,888 (7,220*40%)	3,312 (8,280*40%)	4,072 (10,180*40%)	2,600 [{5,200+(5,200*25%)}*40%]	2,600
Total needs	8,088	10,532	12,352	12,780	33,480
Beginning inventory units	(2,080)	(2,888)	(3,312)	(4,072)	(2,080)
Required production in units	6,008	7,644	9,040	8,708	31,400

* Ending inventory of a particular month is the beginning inventory for the next month.