2 Exercise 8.16 Sales and Production Budgets Berring Company produces two produc

Question

2 Exercise 8.16 Sales and Production Budgets Berring Company produces two products: the deluxe and the standard. The deluxe sells for $40, and the standard sells for S10. Projected sales of the two models for the coming four quarters are given below Standard 90,000 88,400 92,000 91,600 Deluxe First quarter Second quarter Third quarter Fourth quarter 12,000 14,300 16,600 20,000 The president of the company believes that the projected sales are realistic and can be achieved by the company. In the factory, the production supervisor has received the projected sales figures and gathered information needed to compile production budgets. He found that 1.300 deluxes and 1,170 standards were in inventory on January 1. Company policy dictates that ending inventory should equal 20 percent of the next quarter's sales for deluxes and 10 percent of next quarter's sales for standards. Required: Prepare a sales budget for each quarter and for the year in total. Show sales by product and in total for each time period. What factors might Berring Company have considered in preparing the sales budget? Prepare a separate production budget for each product for each of the first three quarters of the year. 1. 2. 3.

Explanation / Answer

1-Sales budget-

Deluxe Quarter1 Quarter2 Quarter3 Quarter4

Units(a) 12000 14300 16600 20000

Unit price(b) 40 40 40 40

Sales(axb) 480000 572000 664000 800000

Standard Quarter1 Quarter2 Quarter3 Quarter4

Units(a) 90000 88400 92000 91600

Unit price(b) 10 10 10 10

Sales(axb) 900000 884000 920000 916000

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