1. Use the following data for MSP Company to prepare a production budget for the
ID: 2375941 • Letter: 1
Question
1. Use the following data for MSP Company to prepare a production budget for the fourth quarter of 2012.
October
November
December
Quarter
Budgeted unit sales
2,000
2,200
2,400
6,600
Sale price per unit
$20
$20
$20
$20
Total sales revenue
$40,000
$44,000
$48,000
$132,000
Management desires an ending finished goods inventory in each month equal to 20% of the next month%u2019s budgeted sales. The desired ending inventory for December is 520 units. The company expects to start the quarter with 360 units in finished goods inventory.
October
November
December
Quarter
Budgeted unit sales
Add desired ending inventory
Total units needed
Less beginning inventory
Required production
October
November
December
Quarter
Budgeted unit sales
2,000
2,200
2,400
6,600
Sale price per unit
$20
$20
$20
$20
Total sales revenue
$40,000
$44,000
$48,000
$132,000
Explanation / Answer
Production Budget
October
November
December
Quarter
Budgeted unit sales
2,000
2,200
2,400
6,600
Add desired ending inventory
440
480
520
520
Total units needed
2,440
2,680
2,920
7,120
Less beginning inventory
360
440
480
360
Required production
2,080
2,240
2,440
6,760
Production Budget
October
November
December
Quarter
Budgeted unit sales
2,000
2,200
2,400
6,600
Add desired ending inventory
440
480
520
520
Total units needed
2,440
2,680
2,920
7,120
Less beginning inventory
360
440
480
360
Required production
2,080
2,240
2,440
6,760
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