Question

Paige Company estimates that unit sales will be 11,000 in quarter 1, 12,800 in quarter 2, 15,000 in quarter 3, and 18,900 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 choose the accounting period June 30, 2020For the Six Months Ending June 30, 2020For the Quarter Ending June 30, 2020
	Quarter
	1		2		Six Months
select an opening production budget item Required Production UnitsTotal Materials RequiredBeginning Direct MaterialsTotal Required UnitsBeginning Finished Goods InventoryExpected Unit SalesDesired Ending Finished Goods InventoryDesired Ending Direct MaterialsDirect Materials Per UnitDirect Materials Purchases	enter a number of units		enter a number of units
select between addition and deduction AddLess : select a production budget item Total Materials RequiredTotal Required UnitsBeginning Finished Goods InventoryDirect Materials PurchasesDirect Materials Per UnitBeginning Direct MaterialsRequired Production UnitsDesired Ending Finished Goods InventoryDesired Ending Direct MaterialsExpected Unit Sales	enter a number of units		enter a number of units
select a summarizing line for the first part Desired Ending Finished Goods InventoryExpected Unit SalesRequired Production UnitsTotal Materials RequiredBeginning Finished Goods InventoryDirect Materials Per UnitBeginning Direct MaterialsDesired Ending Direct MaterialsDirect Materials PurchasesTotal Required Units	enter a total number of units for the first part		enter a total number of units for the first part
select between addition and deduction AddLess : select a production budget item Beginning Finished Goods InventoryTotal Materials RequiredBeginning Direct MaterialsDesired Ending Direct MaterialsTotal Required UnitsDesired Ending Finished Goods InventoryDirect Materials Per UnitDirect Materials PurchasesExpected Unit SalesRequired Production Units	enter a number of units		enter a number of units
select a closing production budget item Direct Materials Per UnitExpected Unit SalesBeginning Direct MaterialsRequired Production UnitsDirect Materials PurchasesDesired Ending Direct MaterialsTotal Materials RequiredTotal Required UnitsBeginning Finished Goods InventoryDesired Ending Finished Goods Inventory	enter a total number of units		enter a total number of units		enter a total number of units

Answer 1

Production Budget

	Quarter 1	Quarter 2	Six months
Sales (units)	11,000	12,800	23,800
+ Ending inventory of Finished Goods	12,800 x 25% = 3,200	15,000 x 25% = 3,750	6,950
Total finished goods inventory needed	14,200	16,550	30,750
-Beginning inventory of Finished Goods	- 2,750	- 3,200	- 5,950
Production units	11,450	13,350	24,800

Ending inventory of the last quarter of the previous year must be 25% of sales of first quarter of the current year.

Ending inventory of the last quarter of the previous year = 11,000 x 25%

= 2,750 units

Ending inventory of the last quarter of the previous year would be beginning inventory of the first  quarter of the current year.