Question

# Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as...

Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2020 sales forecast is as follows.

 Quarter HD-240 1 5,200 2 7,240 3 8,360 4 10,310

The January 1, 2020, 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 2021 are expected to be 25% higher than sales in the same quarter in 2020. Prepare quarterly production budgets for each quarter and in total for 2020.

Sales for first quarter of 2021 will be 25% higher than the first quarter sales of year 2020.

Sales for first quarter of year 2020 = 5,200 units

Hence, Sales for first quarter of year 2021 = 5,200 x 125%

= 6,500 units

Production Budget

 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Sales (units) 5,200 7,240 8,360 10,310 31,110 + Ending inventory of Finished Goods 7,240 x 40% = 2,896 8,360 x 40% = 3,344 10,310 x 40% = 4,124 6,500 x 40% = 2,600 12,964 Total finished goods inventory needed 8,096 10,584 12,484 12,910 44,074 -Beginning inventory of Finished Goods - 2,080 -2,896 -3,344 -4,124 -12,444 Production units 6,016 7,688 9,140 8,786 31,630

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