A company provided the following information on sales for the coming year:
Assume that the beginning inventory is 4,000 units, and that the company policy is to have 30% of the next quarter's sales in ending inventory.Which of the following quarters will have the lowest production?

Question

A company provided the following information on sales for the coming year: 
 Assume that the beginning inventory is 4,000 units, and that the company policy is to have 30% of the next quarter's sales in ending inventory.Which of the following quarters will have the lowest production?

Quizplus · Accepted Answer

Production budget:
 
 11ea8a4c_4889_5a13_a0e6_b19c5a99fa3e_TB5550_00 *1st Quarter: Units in desired ending inventory = (Next quarter's sales × 30%) = 60,000 units × 30% = 18,000 units 
**2nd Quarter: Units in desired ending inventory = (Next quarter's sales × 30%) = 40,000 units × 30% = 12,000 units
***3rd Quarter: Units in desired ending inventory = (Next quarter's sales × 30%) = 90,000 units × 30% = 27,000 units
Since Quarter 4 must have production that is at least 63,000 units (90,000 units + some level of desired ending inventory - 27,000 units), 2nd Quarter will have the lowest production of 54,000 units.

A Company Provided the Following Information on Sales for the Coming