Nascar Company manufactures an innovative automobile transmission for electric c

Question

Nascar Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending inventory for the first quarter will be 44,000 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 480,000 units; third quarter, 274,000 units; and fourth quarter, 308,000 units. Company policy calls for the ending inventory of a quarter to equal 40% of the next quarter's budgeted sales.

Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture

Nascar Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending inventory for the first quarter will be 44,000 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 480,000 units; third quarter, 274,000 units; and fourth quarter, 308,000 units. Company policy calls for the ending inventory of a quarter to equal 40% of the next quarter's budgeted sales.

Explanation / Answer

Hi,

Please find the answer as follows:

Second Quarter

Estimated Sales = 480000

+Opening Inventory = 44000

-Closing Inventory = .40*274000 = 109600

Production = 414400

Third Quarter

Estimated Sales = 274000

+Opening Inventory = 109600

-Closing Inventory = .40*308000 = 123200

Production = 260400

Thanks.

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