Question

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.

Answer 1

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