Flint Company estimates its sales at 120,000 units in the first quarter and that sales will increase by 12,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.
Production in units for the third quarter should be budgeted at
A) 147,000.
B) 138,000.
C) 183,000.
D) 144,000.

Question

Quizplus · Accepted Answer

Production in units for the third quarter should be budgeted at 147,000 units. This is because Flint Company estimates its sales at 120,000 units in the first quarter and that sales will increase by 12,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. So, the production in units for the third quarter should be 120,000 + (12,000 x 2) + (120,000 x 0.25) = 147,000 units.

Flint Company Estimates Its Sales at 120,000 Units in the First