Marshall Company's sales budget shows the following projections for the year ending December 31

Inventory at December 31 of the prior year was budgeted at 18,000 units.The quantity of finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted unit sales.How much should the production budget show for units to be produced during the first quarter?

Question

Marshall Company's sales budget shows the following projections for the year ending December 31

Inventory at December 31 of the prior year was budgeted at 18,000 units.The quantity of finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted unit sales.How much should the production budget show for units to be produced during the first quarter?

Quizplus · Accepted Answer

To determine how much should be produced during the first quarter, we need to calculate the budgeted unit sales for the second quarter.

Budgeted unit sales for Q2 = 36,000 + 42,000 + 48,000 = 126,000

30% of 126,000 = 37,800 (amount of finished goods inventory at the end of Q1)

Therefore, the budgeted unit sales for Q1 = 37,800 + 18,000 (beginning inventory) - 28,800 (amount of finished goods inventory to carry over from the prior year) = 27,000

To meet the 27,000 unit sales projection for Q1, the production budget should show for units to be produced during the first quarter is 66,000 (27,000 divided by 0.3).

So, the answer is C)66,000.

Marshall Company's Sales Budget Shows the Following Projections for the Year