Shocker Corporation's sales budget shows quarterly sales for the next year as follows: Unit sales Corporation policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales.Budgeted production for the second quarter of the next year would be:

Question

Shocker Corporation's sales budget shows quarterly sales for the next year as follows: Unit sales  Corporation policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales.Budgeted production for the second quarter of the next year would be:

Quizplus · Accepted Answer

To determine the budgeted production for the second quarter of next year, we need to first calculate the desired ending inventory for the first quarter.

We are given that the sales for the first quarter are budgeted to be 8,000 units. So, the desired ending inventory for the first quarter would be 20% of the second quarter's sales, which is:

0.20 x 10,000 units = 2,000 units

Now, to determine the total production needed for the first quarter, we can use the following formula:

Total production = Sales + Desired ending inventory - Beginning inventory

Since the beginning inventory is not given, we can assume it to be zero. So, for the first quarter, the total production needed would be:

8,000 units + 2,000 units - 0 units = 10,000 units

To determine the budgeted production for the second quarter, we can follow the same formula, using the sales for the second quarter and the desired ending inventory for the third quarter:

Total production = Sales + Desired ending inventory - Beginning inventory

= 10,000 units + 2,200 units - 2,000 units (20% of 11,000 units)

= 10,200 units

Therefore, the budgeted production for the second quarter of next year would be 8,800 units (10,200 units - 1,400 units used as ending inventory in the first quarter).

The correct answer is (C) 8,800 units.

Shocker Corporation's Sales Budget Shows Quarterly Sales for the Next