Sales Budget Data for Palermo Company are given in BE 9-2. Management desires to

Question

Sales Budget Data for Palermo Company are given in BE 9-2. Management desires to have an ending finished goods inventory equal to 25% of the next quarters expected unit sales. Prepare a production budget by quarters for the first 6 months of 2014.

BE 9-2 info: Palermo Company estimates that unit sales will be 10,000 in quarter 1; 14,000 in quarter 2; 15,000 in quarter 3; 18,000 in quarter 4. Using a sales price of $70 per unit, prepare the sales budget by quarters for the year ending December 31, 2014.

Explanation / Answer

Production Budget:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year Total Sales Units 10,000 12,000 15,000 18,000 55,000 Planned ending inventory 3,000 3,750 4,500 2,500 13,750 Totall production required 13,000 15,750 19,500 20,500 68,750 Less, begening inventory 2,500 3,000 3,750 4,500 13,750 Units to be manufactured 10,500 12,750 15,750 16,000 55,000

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