Question

Prepare the Sales Budget assuming: 1. Expected sales volume: 8,000 units for the first quarter, an increase of 20% is expected for the second quarter, a decrease of 10% for the third quarter, and an increase of 25% for the fourth quarter. 2. The sales price should be $75.00 for the first two quarters and $82.50 for the last two quarters.
Prepare the Production Budget assuming: 1. The company believes it can meet future sales needs with an ending inventory of 25% of the next quarter, for the first two quarters, and 35% of the next quarter, for the last two quarters. 2. The expected sales in units for the first quarter of 2021 is 11,000.

Answer 1

Answer:

Sales budget $     for the 4 quarters is  $ 600,000    $ 720,000            $594000 and $ 825,000  

Production Budget in units for the four quarters i s     7997.6            9000             8900  and  10,350 units

Step-by-step explanation:

Sales Budget

Quarters               I                    II                    III                    IV

Sales Volume    8000           9600                7200            10,000

Sales Price       $75.00        $75.00           $ 82.50            $82.50

Sales $              600,000     720,000            594000         825,000  

We calculate the sales volume by applying the given percent to the sales units for each quarter. Then multiply it with the sales price to get the sales budget.

Production Budget

Quarters               I                    II                    III                    IV

Sales Volume    8000           9600                7200            10,000

+ Desired

Ending Inv.      2400            1800                3500               3850

Less Opening   -----              2400               1800               3500          

Production      7997.6            9000             8900                10,350          

We find the production budget units by adding the desired  ending inventory and subtracting the opening inventory from the sales units calculated above. The ending inventory of one quarter is the opening inventory of the next quarter.As we do not know the ending inventory of the previous year we cannot find the opening inventory of the 1st quarter of the year .