1. Templeton Corporation produces ice cream machines. Last year, Templeton sold

Question

1. Templeton Corporation produces ice cream machines. Last year, Templeton sold 40,000 machines. Unit sales are expected to increase 10 percent each year. Average sales price per machine will remain at $200. Assume finished goods inventory is maintained at a level equal to 5 percent of the next quarter’s sales. Finished goods inventory at the end of last year was 2,300 units. a) What is Templeton Corporation’s sales budget for this year? b) What is Templeton Corporation’s production budget for this year?

Explanation / Answer

a Unit sales 44000 =40000*1.1 Average sales price 200 Total Sales budget 8800000 b Unit sales 44000 Add: Finished goods inventory 605 =((44000*1.1)/4)*5% Total needs 44605 Less: Beginning inventory 2300 Production budget 42305

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